Chongqing - China’s construction sector is shifting from high-speed to high-quality development, aiming to align with global best practices while addressing its own structural imbalances. The outcome will shape not only domestic growth but also the standards China sets as it exports its construction capabilities abroad.

Central to this transformation is the urgent reform of cost management—a fundamental pillar in engineering projects. Effective cost control is not only crucial for managing investment but also plays a vital role in ensuring safety, maintaining quality, and supporting the sustainable growth of the industry in the long run.

On April 23 in Chongqing, Wang Wei, first-level inspector at the calibration department of the Ministry of Housing and Urban-Rural Development, said that construction cost reform is advancing alongside industry transformation, citing the Lubuge Hydroelectric Project as a key example.

On April 23, Wang Wei, first-level inspector at the calibration department of the Ministry of Housing and Urban-Rural Development, shared his insights on the construction industry in Chongqing. (Photo/Chongqing Municipal Commission of Housing and Urban-rural Development)

The Lubuge Hydroelectric Project, launched in 1984, is a major hydroelectric power facility located in Yunnan Province, southwest China. With a total installed capacity of 600,000 kilowatts and an average annual generation of 2.75 billion kilowatt-hours, it plays a vital role in supplying electricity to Yunnan and surrounding regions.

Wang highlighted the Lubuge Hydroelectric Project, awarded to Japan’s Taisei Corporation through a World Bank-led international bid, as a milestone for China’s construction sector. The winning price was 43% below the base, and the project was completed ahead of schedule, setting new standards in both cost and efficiency.

"Their efficiency was four times the national average, which directly sparked China's reforms in engineering construction project management," Wang stated. "It not only facilitated the shift of China's construction industry from a planned economy to a market economy but also gave rise to project-based construction."

A major reform from this project was the separation of corporations and projects. "By promoting project-based construction using Japan's Taisei experience, we advanced China's engineering project management system," Wang explained.

As a result of the project-based construction model, China has implemented several foundational management systems that remain in effect today, including enterprise qualification management and bidding and contracting systems, enabling more companies to integrate internationally.

Wang emphasized that embracing international innovations in cost management is key. "We must absorb international technologies and management experiences, especially in system design, while actively participating in the development of global standards," he said. "Meanwhile, we should share our advanced technologies and practices with other countries, promoting sustainable and green building technologies."

With the rapid advancement of AI technologies, the industry is now focused on overcoming the challenges of digital cost management and cost data. Wang observed that this year, China has begun establishing cost database index indicators for government-invested projects, further accelerating the promotion of digital construction.

Regarding Chongqing's practices, the city has formulated a new pricing framework known as "1+1+2+5+N," which includes: one pricing basis system framework, one digital cost platform, two supporting management methods, five pricing basis sections (including estimation, budget standards, consumption standards, bill of quantities measurement, and pricing rules), and N sets of consumption standards and index indicators.

Chongqing is accelerating the construction of affordable housing for basic needs. (Photo/Chongqing Municipal Commission of Housing and Urban-rural Development)

Chongqing's housing and urban-rural construction has also developed a digital cost technology system and pioneered differentiated supervision in the cost consulting industry. The city is the first in the country to implement this approach and has set work benchmarks for the industry. 

Moreover, Chongqing is accelerating the construction of affordable housing for basic needs. To date, the city has begun constructing 15 sales-based affordable housing projects, comprising 8,092 homes, which offer low- to middle-income families the opportunity to own a home at a more affordable price. 

This approach is part of Chongqing's broader efforts to improve housing accessibility and quality, with multiple sales-based affordable housing projects currently underway.