Ugly Highway Crash for Chinese Firm in Poland
A construction project billed as a breakthrough for a China engineering concern ended in friction and failure
A Polish highway project that was supposed to crack open the lucrative European construction market for a Chinese engineering conglomerate has slammed doors instead.
On June 13, Poland's General Directorate for National Roads and Highways (GDDKiA) announced the decision to cancel its 1.3 billion zloty (US$ 472 million) construction contract with China Overseas Engineering Group Co. (Covec). Covec's consortium included Shanghai Construction (Group) General Co. and China Railway Tunnel Group Co. Ltd.
The Polish government agency also handed Covec a bill for 741 million zloty to cover compensation and fines following what it claims were the contractor's mishandlings of a project to build 49 kilometers of a 91-kilometer road between Warsaw and Berlin.
Officials at Covec, a subsidiary of China Railway Group (SSE: 601390), have yet to formally respond to GDDKiA's demands. But source at Covec told Caixin that the contractor had earlier requested but was denied more money from GDDKiA to cover unexpected cost increases.
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Another twist came when China's state-run People's Daily newspaper reported in mid June that Covec had asked to cancel the contract days before GDDKiA's decision.
No matter which side ultimately comes out ahead, though, the once-happy relationship between the Polish government and a Chinese builder is ending in a lose-lose situation, said Chai Hongyun, chairman of the Polish-Chinese Economic Cultural Association.
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