A company and its leader not hurt by worldwide adverse publicity is something of a rarity, but China Pacific Construction Group Co. Ltd. and its founder Yan Jiehe are in a class by themselves.
China's largest privately owned construction firm and its billionaire founder have sparked massive controversy locally, in a country where business and government are tightly linked, and globally, as environmentalists react to what some see as China Pacific's scorched-earth approach to development.
Yan and the company dismiss as an exaggeration the claim of some media and critics that his forces flattened 700 mountaintops to develop the remote city of Lanzhou in northwestern China into an amenity-filled metropolis. But he staunchly defends his land-clearing practices for the 94.4-sq-mile site.
He insists that slicing mountains was the best way to ensure “land increases at zero cost” and that the action actually improved the environment since the mountains ringed in air pollution. "Now the air quality has improved," says Yan. "By pushing back, water from the Yellow River is available.”
Yan compares the development to the birth of Las Vegas, an argument that seems to have convinced the government as well.
On its website, the company claims the development will result in "further … vitalizing wasteland resources in Lanzhou, expanding urban construction and development space, rational planning of the city and transforming industrial structure."
Says Yan, "It’s the same as how Las Vegas was built."
Landing on the Fortune 500 List
Amid the controversy, or in spite of it, China Paciifc continues to grow. According to an article in Fortune magazine, company revenue is believed to be nearly $60 billion, landing the firm at No. 166 on the Fortune 500 ranking.
The figure exceeds those of other big global builders such as Bechtel Group, which noted total corporate revenue of $39.4 billion in 2013, and France's Vinci, which is the fifth-largest firm ranked among ENR's Top 250 Global Contractors and the largest non-Chinese company, reporting $54.1 billion in global construction revenue last year.
However, China Pacific Construction appears to have a way to go to catch its two Chinese-government-owned peers, China State Construction Engineering Corp. and China Railway Construction Corp. Ltd., which rank first and second on ENR's list, claiming $97.8 billion and $96.2 billion, respectively, in 2013 global revenue.
China Pacific Construction already has about 300,000 employees, and Fortune speculates the firm could reach the $100-billion revenue mark in five years.
Even so, Yan hardly attempts to cover up his actions with corporate PR lingo. Such show of bravado by a privately owned Chinese firm is almost unbelievable in Communist China's state-dominated construction industry, in which very little ever happens without point-by-point approval of different official agencies.
One reason is that China Pacific Construction is a vast and powerful company engaged in dozens of major of projects across China in such sectors as urban development, highway construction, housing projects and water conservation.
“Pacific has an amazing ability to judge what local and provincial governments need," Rupert Hoogewerf, chairman of wealth consultant Harun Report, who has been tracking the company for more than seven years, told ENR. "It comes up with the funds for the projects, and also takes the risks.”
Taking Risks
Even with the competition Pacific poses to state-owned entities, China's central government in Beijing did not come up with new land creation efforts because it wants to encourage low-cost housing and new city development projects, a Chinese official connected with the construction industry said on condition of anonymity.
“The government also wants to encourage private construction companies to take greater responsibilities because managers of state-run firms are extremely risk-averse,” the official said.
Yan, who claims to have gone into semiretirement at age 54 after passing on most chief executive responsibilities to his son, Yan Hao, is getting ready to make initial forays in foreign lands, starting with Eastern Europe. One report suggests Pacific Construction has already bagged a contract to build a small stretch of road in Moldova. The company is also looking for work in New Zealand.
“Now I plan to do business in Europe because the standard is the highest there," Yan told ENR. "I would like to challenge the best. Only when my business excels in Europe will I consider expanding to Asia, Oceania, Africa, North America and Latin America,” said the one-time high-school teacher, who also once ran a cement factory.
“First I will do business in 15 European countries, then 35 and finally 55 countries," he claims, "By that time I think there will be no infrastructure and engineering obstacle for me to work across the globe."
Yan also talked about future plans to list Pacific Construction in a foreign stock exchange. At the moment, Pacific is among a handful of closely held Chinese companies in global rankings.
