The new crown pneumonia epidemic has brought a huge impact on the global economy, and the Russian-Ukrainian war will bring huge changes to the geopolitics in 2022. The rising risk of war, spillover and continuous fermentation have brought about huge changes in the global construction market. The impact of China's foreign contracted projects on the entire industry cannot be ignored.

In the past 10 years, the scale of China's foreign contract engineering business seems to have hit the "ceiling" of growth. However, in the following years, the value of new contracts signed by Chinese foreign contracting companies has basically stabilized between US$250 billion and US$260 billion. Under the impact of the new crown pneumonia epidemic in 2020, the business volume of foreign contracting enterprises dropped slightly by 1.8% over the previous year, but increased by 1.2% in the following year. While the value of new contracts in 2021 is still below two 10-year highs, it is also the third highest. As an important leading indicator for judging the performance of foreign contracting companies, the increase in the value of newly signed contracts in 2021 may have an important positive effect on the industry in 2022. If this is used as a basis for judgment, the turnover of foreign contracted projects may increase in 2022.

However, judging from the actual performance of China's foreign contracting projects in the past 10 years, it seems that it is not so simple. Although in the past 10 years, the correlation coefficient between the newly signed contract value and the completed turnover of foreign contracted projects has reached 0.89, it should be calculated in combination with a one-year time lag, taking the newly signed contract value in the first year and the completed turnover in the second year. Sequence comparison, the correlation coefficient dropped rapidly to 0.79. That is to say, the newly signed contract value is still likely to indicate the change direction of the completed turnover in the following year, but the accuracy of the prediction is not too high. In fact, it can be found from Figure 1 that between 2017 and 2021, the curve of the newly signed contract value is inconsistent with the completed turnover, or even the opposite. By observing the changes in completed turnover, it can be found that during the outbreak of the new crown pneumonia epidemic in 2020, the completed turnover of Chinese enterprises dropped sharply by 9.8%, while the decline continued in 2021, but the decline was reduced to 0.6%. If the trend continues, the turnover of foreign contracted projects completed in 2022 seems to continue the downward trend.

Judging from the continental distribution of the completed turnover of China's foreign engineering contracting enterprises, Asian countries are undoubtedly the most important sources of income. Moreover, from 2012 to 2020, the revenue contribution rate of Asia has gradually increased from 46.6% to 57.2%, becoming the business source of more than half of China's foreign contracting enterprises. At the same time, Africa's contribution has shown a downward trend, from 35.0% in 2012 to 24.6% in 2020. The two continents of Asia and Africa together contributed 81.8% of the turnover in 2020, accounting for more than four-fifths. Although there is a lack of specific data for 2021, the market structure dominated by Asia and Africa may not undergo major changes. The performance of Asia and Africa in 2022 may determine the basic development status of China's foreign contracting industry as a whole.

However, although the European market accounts for a small proportion in China's foreign contracted engineering industry, it cannot be ignored. From 2012 to 2020, the completed turnover of Chinese enterprises in Europe increased rapidly from US$4.60 billion to US$13.96 billion, with an average annual growth rate of 8.9%, much higher than the 3.7% growth rate of Chinese enterprises’ global turnover, which is also high. The growth rate of business in Asia was 6.4%. Russia, Ukraine and Belarus, which were directly affected by the Russian-Ukrainian war, are all important locations for China's foreign contracted engineering projects. In 2020, the completed turnover of Chinese enterprises from the above three countries was US$4.26 billion, US$670 million and US$1.04 billion respectively, which together accounted for nearly half (42.8%) of the completed turnover of Chinese enterprises in Europe. If the projects in these countries cannot be continued due to reasons such as war or sanctions, it will not only result in a rapid decline in completed turnover, but may also lead to the failure of the company’s existing investment, and may even be liable for breach of contract and compensation for failing to perform the contract on time.

From the perspective of the industry, the advantages of China's foreign engineering contracting enterprises are concentrated in three major fields: transportation, power engineering and general construction. In 2020, the completed turnover of the three major fields was US$40.31 billion, US$30.64 billion and US$29.74 billion, accounting for 25.8%, 19.6% and 19.1% respectively. Under the impact of the epidemic, the completed turnover of the three major areas in 2020 decreased by 36.4%, 39.6% and 53.5% respectively compared with the previous year. In contrast, the business contraction of petrochemical and communication engineering construction was smaller. In 2022, under the impact of the Russian-Ukrainian war, the global energy trade may undergo a major structural adjustment, and the demand for energy infrastructure construction in Europe may increase significantly. However, restricted by the EU's restrictions on government procurement, coupled with differences in attitudes towards enterprises of different ownerships, it is difficult for Chinese foreign contracting companies to participate.

The global epidemic prevention situation will take on new characteristics in 2022. The number of cases will increase rapidly, and some countries will gradually relax restrictive measures on the movement of people and business operations, and the driving force for economic growth will be significantly enhanced. According to the data released by the Ministry of Commerce in January, the turnover of my country's foreign contracted projects was equivalent to US$8.27 billion, a year-on-year decrease of 6.4%. It is expected that due to the impact of the conflict between Russia and Ukraine, the progress of existing engineering projects may be affected. In the face of environmental uncertainty, Chinese foreign contracting enterprises may face many challenges in business market development and new project promotion in 2022. It is necessary to further adjust the allocation of global resources and focus more resources on maintaining peace and harmony. Strengthen the main market and main industry field of the enterprise, and don't spread too much. It is necessary to make good plans, arrange business reasonably, discuss with the owner to determine the appropriate project cycle and project goals, and reduce the uncertainty of cash flow.

The Fed has already started the process of raising interest rates, and the market generally expects that several interest rate hikes in 2022 are more likely. In recent years, the overseas financing of foreign contracted engineering enterprises has become more common, the financing cycle is long, and the financing scale of the contracting business with capital is large. Enterprises need to moderately control the scale of debt, adjust and shorten the repayment period, and do a good job in matching cash flow. While business in traditional industries is shrinking, engineering needs for infrastructure such as low-carbon, next-generation communications, environmental restoration, industrial manufacturing transformation and upgrading, and enhancing supply chain resilience are becoming new growth points. New rules, including RCEP, have also created more space and placed higher demands on the region's infrastructure. Proposing innovative solutions together with partners will help Chinese foreign contracting enterprises to seize the track of competitive advantage. Editor / Xu Shengpeng