Concerns China State Construction Engineering is piggybacking on Australian companies to gain a permanent foothold in Victoria

A key player in the contentious Belt and Road initiative is bidding for a massive Andrews government contract, raising concerns among the building industry.

China State Construction Engineering is bidding for an $850m housing contract with the state government. Picture: David Crosling

A Chinese-owned company blocked from buying collapsed construction giant ProBuild on security grounds is bidding for an $850m housing contract with the state government.

China State Construction Engineering (CSCE) has quietly joined forces with two Australian firms, Capella Capital and Hickory, to bid for one of Victoria’s biggest affordable housing contracts.

The $850m Ground Least Model 2 contract seeks to build up to 1400 homes in partnership with the government.

If successful, the consortium would build at least 650 new social housing homes and replace another 502 at four sites in South Yarra, Prahran, East Hampton and Port Melbourne.

They would also be responsible for maintaining the new homes or 40 years.

China State Construction Engineering Australian was blocked from buying collapsed construction giant ProBuild. Picture: Ian Currie.

But figures across Victoria’s construction industry have questioned whether CSCE should be allowed to tender.

It is a key player in the Chinese government’s contentious Belt and Road soft power initiative, which was at the centre of a deal with the Andrews government that was later scrapped by Canberra.

In 2021, then Treasurer Josh Frydenberg also blocked the state-owned company from buying ProBuild over national security concerns.

CSCE’s involvement in the bidding has prompted concerns of similar risks and that the company is piggybacking on Australian companies to gain a permanent foothold.

It already has a presence in Victoria through the North East Link project, where concerns were also first raised when it became part of the consortium delivering a major package of works.

But one building industry source, who asked to remain anonymous, said there were concerns the new tender would complicate matters by allowing the company to gain a more permanent presence as a government contractor and in the residential housing sector.

Another risk was that CSCE could step in to control the Australian companies in the consortium if they collapse during 40-year contract.

“They are one of the biggest builders in the world,” he said.

“At the very least the department, and also Canberra, should do their due diligence and ask how the project will be managed in light of the rejected ProBuild offer.”

A spokesman for Homes Victoria, the agency responsible for the contract, said they “cannot comment on matters relating to the Ground Lease Model tender process, including individual bidders, due to probity restrictions”.

On its website, the agency says the contract will aim to tackle the lack of “lack of secure, longer-term rentals”.

The issue has emerged as Victoria’s building industry goes through a difficult period and soaring costs send many large companies into administration.

Victoria’s Belt and Road agreement was torn up by the Morrison government after it introduced new laws allowing it to cancel deals between states and foreign powers.