Scoping China 

Venessa Wong

March 13, 2008 

China's physical and technological infrastructure is transforming at lightning speed, but institutional and cultural realities are much slower to change, which presents huge challenges for project consultants, managers and teams. Here's an overview of the project management landscape in China, and the prevailing prerequisites for getting things done.


China is pulling out all the stops when it comes to delivering world-class projects. Completed in only four years, the world's largest airport terminal, measuring 10.6 million square feet, opened in Beijing in February. According to Project Management Institute (PMI) CEO Greg Balestrero, this is just one example of great project management in China today. Among other achievements: by mid 2007 China's internet bandwidth grew to over 312Gbps, the number of foreign invested R&D centers rose to more than 800, and this spring the world's second tallest building, the 492-meter tall Shanghai World Financial Center, will open.
The changes in China are remarkable, but global project teams continue to struggle with old problems: balancing Western practice with local business custom to deliver high-quality results. While opportunities are abundant, risk runs high. In Shanghai alone, there were 624 failed property projects as of 2002. David Cole, a Shanghai-based project manager for engineering and construction services company SIP Group, describes China as a market where doing business is getting easier, but relationships with authorities remain vital, business styles clash and value is often sacrificed for money and time. "It's all challenging," he says about China's landscape.
To ensure any project goes smoothly, "you have to get into the nitty gritty of everything," including understanding government priorities and improving communication with the local team, Cole says. Especially in a top-down system, project managers must understand state needs and build relationships or "guanxi" with local authorities, which can help earn support and approval for projects. This is even truer in China's less developed markets, where business resources are limited and government plays a larger role. Failing to do so may lead to problems that seem all too familiar in this booming economy: poor quality and inadequate supervision.
It helps to look at China or 'Project China' through familiar concepts: time, scope and cost.
TIME: China operates according to five-year plans, developed by the central government to periodically set out social and economic initiatives. The First Five Year-Plan was adopted by Chairman Mao Zedong in 1953 and focused on industrialization and political centralization based on the Soviet model. Although China is transitioning from a planned economy to a market economy, the Plan, which was renamed the "Guidelines" in 2006, remains vital to national policy.
SCOPE: Today, the 11th Five-Year Plan (2006-2010) focuses heavily on environmental sustainability, infrastructure expansion, high-tech industry, bridging the wealth gap and building a harmonious society priorities that will guide many national and local decisions. Among major goals are reducing energy consumption per unit GDP by 20 percent, adding 17,000 kilometers of railways, building internet and mobile communication networks and boosting average rural income by 5 percent annually.
COST: China has made huge investments into the plan. Among other commitments, over $157 billion (U.S.) will be dedicated to environmental protection projects, $155 billion to building a railway and rapid transit system network and $27 billion to education between 2006 and 2010. Carrying out these initiatives has also required huge sums of foreign direct investment, which fueled more than 37,800 projects in 2007, according to figures from the Ministry of Commerce.
Since the central government put infrastructure development at the center of the Five-Year Plan, a torrent of project opportunities have opened in China in sectors from construction and engineering to research and IT. "The word [officials] use the most in this plan is 'project'," says Sylvain Gauthier, managing director and a founder of training firm ProTrain China.
The environment for foreign companies is not necessarily getting easier, however. China is now looking to reduce reliance on foreign funds and boost domestic enterprises. Significant changes have already taken effect this year, with preferential tax rates to foreign companies terminated in a range of sectors, particularly in low-cost manufacturing. The upshot: opportunities for foreign companies are still abundant but changing. At least in the short term, the government will continue to support projects in industries it hopes to build up, such as environment, high-tech and venture capital.
Audrey Curtis, professor and executive director for graduate programs in telecomm & project management at Stevens Institute of Technology (which runs several programs in China), advises, "Stay ahead, prove yourself beneficial but do it with your eyes open."
Managing Culture
Aligning with China does not only mean with government, but also with culture. Project managers in China cite cultural differences among the biggest challenges. Many complain about poor quality, workers hiding problems from management, weak team ethic, corner-cutting, poor internal communication and inadequate involvement by middle management. Yet pointing fingers does little to help. Janet Carmosky, president at China Prospects, argues, "We have to stop equating 'Western' with success and 'Chinese' with failure Success doesn't always come from a Westernized management approach."
In order to be effective, Western project managers must be good communicators and be willing and patient to share management expertise with their team, says China IT Lead for Pall Corp. Wang Fuguo, who also worked on IT systems for the 2008 Olympics. As Western management concepts are relatively new to the country, even Chinese PMPs admit that there remains a sizable gap in knowledge and experience. Michael Poli, a professor of project management at Stevens, explains that while China has advanced technology and resources, it still lacks expertise.
Among the major "weaknesses" identified in Chinese project managers are reliance on technology and manpower rather than strategy, and lack of experience. Professor Zhou Jun with Central University of Finance and Economics says as a result, the Chinese can be weaker resource managers than their Western counterparts. This is especially unsustainable because finding labor and funding will become difficult as China becomes more prosperous, cautions PMI's Balestrero. The mindset will change as education expands and the human resources landscape matures.
In a culture that "has a much higher tolerance for ambiguity," as Carmosky puts it, being clear about your goals is vital. Project managers must focus on setting "clear requirements" in the original scope statement including expectations for quality, responsibility, budget, schedules, closing and other parameters. IT project management expert Joseph Phillips believes this is key. "Foggy ideas lead to failure," he says. "Quality is about meeting requirements."
Wang fully agrees. He describes an incident in which an ERP program had to be redone because it did not satisfy poorly articulated requirements. "It was a big mess," he says. "There needs to be clear requirements between the project manager and client." He further notes that even if partners do not understand your methodology, you must be sure that they understand what the deliverables should be.
In fact, building this mutual understanding can help project managers avoid a majority of misunderstandings, cultural or otherwise. Most importantly, it can be effective in getting the Chinese partner on the same page about quality and building long-term value into a project critical concepts that Poli says were hard to communicate to his Chinese graduate students. Part of the problem is that Chinese and Western interpretations of "quality" are often not the same, says Robert Benedetti, business development manager for SIP. By building "quality" definitions into the scope statement, project managers can help ensure that they are not lost in translation.
Ultimately, no matter how challenging the environment is, examining the bottom line, understanding the local culture and establishing a clear objective are fundamental.
Changing Standards
As China's market gradually matures, project management is becoming more regulated. A decade ago, opportunity was abundant and legal barriers were sparse and poorly enforced. Yet according to SIP Project Manager Francois Saugny, China's Wild-West era is ending. With China in the middle of the global supply chain, "now we have the microscope on China," says Balestrero.
In 2004, the Ministry of Construction released Circular 200, which requires project management enterprises to "hold one or more qualification certificates for survey, design, construction, supervision, cost advisory, or tendering agency," states a Jones Day report. Gradually, the framework will become more complex.
China is also adopting international project management standards. In a significant move for the industry, the PMI established a Beijing office in 2005. As business becomes more international, "you need a common approach," says Phillips, "PMI provides a common lexicon and philosophy of what project management is." However, Gauthier and Zhou both note that many Chinese training institutions have taken PMI's core principles and adopted them for the local market. Whether that fragments the market or makes it more effective has yet to be determined. In the meantime, PMI will continue working closely with the government, especially the Ministry of Construction and the Ministry of Information Industry, to popularize its framework. PMI hopes to eventually become involved with the development of state policies for project management.
Foreign universities are also bringing project management know-how. The Stevens Institute of Technology, at the invitation of the Chinese government, delivered its graduate program in project management to a group of employees of the China Development Bank. The school has also had partnerships with three other Chinese universities, as well as IBM. Hundreds of other overseas and Chinese universities are starting to offer graduate programs in project management.
Contracts and certification are also changing. In engineering and construction for instance, FIDIC contracts are increasingly recognized in China. According to Benedetti, in the case of a dispute "you can hold FIDIC like a sledgehammer." It protects the rights of foreign companies far better than the standard contract issued by China's Ministry of Construction. Saugny adds that because going to court in China is a complicated and expensive process, having a good contract as a basis for negotiations saves a lot of heartache.
In the end, the greatest resource for foreign project managers is still the Chinese government, which can provide assistance decoding regulations, offer useful business data and call shots that help projects swim rather than sink. Wang suggests appointing an individual, preferably a local Chinese who is very familiar with the political landscape, to manage government relations and keep managers up to date on policy changes and requirements. "The government is quite supportive and committed," he says.
Project teams will inevitably confront a complex mix of opportunity and challenge in China. Success depends on a delicate mix of knowing the China market, building long-term relations with the local government, adapting management technique and of course maintaining a sense of humor when things get tough, which they always do.