Payment Problems and Regulatory Responses in the Construction Industry: Mainland China Perspective

Abstract

Payment problems have continually raised grave concerns in construction industries throughout the world. The Chinese construction industry is just recovering, with reported success, from an era of serious payment problems, manifested in high levels of arrears and prolonged payment delays. It has been seen that payment problems can arise from both contractual conflicts and willful delays. The Chinese government began to intervene in these payment issues during the late 1990s, both by legislation and direct administrative input. Given the characteristics of the Chinese construction industry and its special payment problems, the direct administration mode was seen to be effective in reducing existing payment arrears in mainland China. For dealing with future problems, the Chinese government is engaged in formulating a “long-term mechanism.” This mechanism and related processes, of course, must be compatible with the industry characteristics, while their practicability should be ensured. This paper reviews the recent moves to overcome accumulated payment arrears in mainland China, and provides a brief preview of possible developments in the future. Comparisons are also made with similar problems and different approaches to their resolution in other countries, in order to initiate a basis for cross-fertilizing future improvements.