China’s Tallest Tower Builder Assures Quality Amid Sand Scandal

China’s Tallest Tower Builder Assures Quality Amid Sand Scandal

China State Construction Engineering Corp. (601668), which is building the country’s tallest tower, said materials used in all its projects meet quality standard as the southern city of Shenzhen conducted inspections on builders.

Samples from buildings, including the 660-meter Ping An Finance Center due to be completed in 2015, were tested, according to Shenzhen’s Housing and Construction Bureau. The industrywide inspection in the city last week followed a China Central Television newscast on March 14 that investigated the use of substandard concrete by some developers in Shenzhen that used low-quality sea sand instead of river sand.

“I’m not quite familiar with the incident of the Ping An Finance Center, but we put quality and safety as priority in all our projects in 40 cities, including Shenzhen,” Kong Qingping, vice president of the company, said at a press conference in Hong Kong yesterday after the earnings of China Overseas Land & Investment Co. of which he is chairman. “I’m glad to say, so far, we haven’t found such incidents.”

The Shenzhen government found 31 companies violated industry rules and ordered eight of them to suspend business for one year in the city for using substandard sea sand to make concrete, according to a notice posted on the bureau’s website on March 16.

“Sea sand contains salt and chloride, which will corrode steel used in concrete,” Han Jixian, Beijing-based secretary general of China Aggregates Association, which represents the nation’s sand production and excavation companies, said in a phone interview today. “This is the major problem of using sea sand as raw material for concrete.”

Cheaper Option

Even as China bans such practices in concrete production, ocean sand is still being used because of price differences and supply shortage of river sand, Han said. Prices of sea sand are about half those of sand from rivers or lakes, he said.

China State Construction Engineering is the contracted builder of Ping An Finance Center, while the real estate arm of Ping An Insurance (Group) Co. (2318), China’s second-biggest insurer, develops the center.

Ping An banned the builder from using sea sand in the construction of the center when they signed the contract, it said in an-emailed statement today. The company will order the builder to double check the source of the concrete and it will cooperate with the Shenzhen government’s investigation, it said.

The tower will be China’s tallest building when it is completed, according to the skyscraper center database of the Council on Tall Buildings and Urban Habitat. China’s tallest building currently is the 492-meter Shanghai World Financial Center.

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net; Jasmine Wang in Hong Kong at jwang513@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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