China's infrastructure investments 'threaten its economic growth'

[dray]

I would want to know a bit more here.

1. In last one decade Chinese government led funding of infrastructure project as a means of stimulus package after global recession. we must note here that infrastructure sector and associated construction sector keeps several support industries going. For example when you build large rail roads, you are automatically help cement, steel, heavy construction equipment, electrical equipment too. Similar analogy for roads and marine industry (ports etc) can also be given. Now if you ask results, in the years (2008-2015), when whole world was struggling with recession, China was still logging strong growth and a large credit of this must go to central bank assisted massive investment in infra sector.View attachment 333977 View attachment 333976
2. Several infra projects do not yield immediate results and while return on investments might be low, we need to take into account socio-economic parameters as well into account. Example, we build a railway line in far flung areas, that might not generate immediate passenger or freight revenue, but if it allows industry to spread in that remote area will bring in long term benefits of avoiding population movement and uniform distribution of employment opportunities, keeping real estate prices in check. I discussed a similar thing with @WAJsal on his CPEC tread. This i believe remain true anywhere in the world.
3. Third is problem that China might face. I think the real threat lies in Chinese manufacturing overcapacity and if world remains in slow down era for another 5-6 years, there could be a real problem for export dominated Chinese economy.
4. In continuation of (3) above, ex RBI chief Dr. Rajan once wrote that economies need to evolve constantly based on what their core strengths are. For example, India rode heavily on Agriculture for several decades, before benefits of good education for generation after independence brought in an opportunity for manufacturing, engineering and later IT and service sector. He further opined that economies based on using natural resources (minerals, fossil energy etc) at some point in time will find themselves in trouble. This looks more and more true with Oil exporting economies feeling the heat of low crude prices.
5. To move ahead and prepare for an economic future, we cannot predict accurately, the only solid bet is development of human skills and education.
6. To summarize, measures like low interest rate regime, economic stimulation, preferential investment in certain sectors do help, but only in short term. The effects of these measures tend to saturate and then unless there is a willingness and preparedness to change path, we find ourselves in a vicious cycle, like world finds itself in that of a very low growth.

Tagging experts for more on this

@Levina @Rain Man


That's a very good example to show, how persistent investment can lead to creation of business opportunities hitherto unknown.
View attachment 333978
View attachment 333979
Today China's HST network stands at an amazing 20000 kms.
There is a huge growth in passenger revenue as well, with more people migrating from Air to HST travel.
However if somebody asked 15-20 years ago about such a massive investment in a relatively risky (economically) public transport technology, most economies would not have dared to take a plunge. But today we see obvious benefits of a consistent policy.

Those two charts are interesting, they clearly show that about half of China's growth rates in the past decade was driven by huge investment stimulus, which is likely to be unsustainable beyond a point.

 

[AndrewJin]

i will go there next time. Vietnam is becoming hots pot for Chinese tourists as price, safety and friendliness can beat any western countries hands down.

Indeed, in Vietnam, you don't really need to worry about safety when you walk at night alone.

 

[AViet]

Hope you Chinese tourists are welcomed in Vietnam.

 

[Dungeness]

This SCMP article reminds me of an editorial piece by a famous Chinese liberal news paper titled "Slow Down, China. Wait for the soul of your people", on the aftermath of 7.23 railway accident in 2011, when those "Public Intellects" ("Anti-nationals" in Indian term) turned the public sentiment into a social media frenzy, then a smear campaign against HSR and other infrastructure building, then China's development model. China had 6000 KM of HSR then, and it has 20,000 KM now. Those people are on the wrong side of history, and reduced themselves into a distant joke.

Being a single party state, Chinese government can afford to take a long-term approach to its nation building process, without scramble every 4-5 years to "bribe" voters who are inherently short-sighted, and without zig-zaging their way between each alternate administration. Chines government's very-long-term nation building master plans are based on 50-100 year time scale, case in point, in 1957 Chairman Mao envisioned that in 50-75 years, China's GDP would overtake that of USA. Well, we will see if Mao's vision will be realized by 2023.

Chinese developing model presents such a challenge to western scholars and observers, whose knowledge, experience and logic are entirely based on western values, so that their prediction track records are not exactly something they can proudly write home about, and will remain so until new crop of them appear, with better comprehension of Chinese cultural and how Chinese system works.

 

[AndrewJin]

This SCMP article reminds me of an editorial piece by a famous Chinese liberal news paper titled "Slow Down, China. Wait for the soul of your people", on the aftermath of 7.23 rail accident in 2011, when those "Public Intellects" ("Anti-nationals" in Indian term) turned the public sentiment into a social media frenzy, then a smear campaign against HSR and other infrastructure building, then China's development model. China had 6000 KM of HSR then, and it has 20,000 KM now. Those people are on the wrong side of history, and reduced themselves into a distant joke.

Being a single party state, Chinese government can afford to take a long-term approach to its nation building process, without scramble every 4-5 years to "bribe" voters who are inherently short-sighted, and without zig-zaging their way between each alternate administration. Chines government's very-long-term nation building master plans are based on 50-100 year time scale, case in point, in 1957 Chairman Mao envisioned that in 50-75 years, China's GDP would overtake that of USA. Well, we will see if Mao's vision will be realized by 2023.

Chinese developing model presents such a challenge to western scholars and observers, whose knowledge, experience and logic are entirely based on western values, so that their prediction track records are not exactly something they can proudly write home about, and will remain so until new crop of them appear, with better comprehension of Chinese cultural and how Chinese system works.

That liberal newspaper is famous for lies and sh*ts...
That railway accident was not even on a real high-speed railway....
It was only an excuse they used to demonise our HSR development....
Such ridiculous movement led to a series of negative outcomes....
Large number of HSRs were built at a lower standard.....
And now, we are paying the price....such low-speed railways cannot meet people's requirement for higher speed. So we are planning more....and spending more....
Guess what, everybody now is praising the imprisoned then minister Liu Zhijun....


I understand such populist "movements" happen everyday outside China, but we cannot tolerate a second one here.

 

[Sanchez]

Don't they calculate the income of China's transport investment?
It's about 50yuan per 100km per passage. Think about thousands of roaring HSR trains with every seat booked or millions of cars and trucks running on the highways everyday. All the investment might have been returned within a year or two. It's a good investment and I guess that's why China is fond of promoting infrastructure investment in other countries.

For Indians I don't suppose that you have the opportunity to enjoy the speed of connectivity, maybe not in your lifetime...

Pls bring an article here after some brainwork.

 

[ahojunk]

My 2-cents.

The AIIB is going to have about 100 members soon. By all accounts, it is going to be successful.

Last year, it was vehemently opposed by US and JP, which failed miserably.

AIIB stands for Asian Infrastructure Investment Bank. The keyword is infrastructure.

Now, all of a sudden there are a lot of negative news regarding infrastructure.

Is this the beginning of round 2 targeting the AIIB?

I am just wondering. Call me cynical if you like.

 

[TaiShang]

My 2-cents.

The AIIB is going to have about 100 members soon. By all accounts, it is going to be successful.

Last year, it was vehemently opposed by US and JP, which failed miserably.

AIIB stands for Asian Infrastructure Investment Bank. The keyword is infrastructure.

Now, all of a sudden there are a lot of negative news regarding infrastructure.

Is this the beginning of round 2 targeting the AIIB?

I am just wondering. Call me cynical if you like.

Interesting, indeed.

Studies estimate some 10 trillion USD worth of infrastructure that will be needed in East Asia over the next decade (ADB report, I guess). Yet, the economic growth engine of the world and still a developing country with huge deficit in basic infrastructure does not need at least a quarter of that 10 trillion USD?

That's hard to believe.

Luckily, like most other reports, this one will to be ignored by China's decision makers. It is good that we do not blindly follow Western development concepts (even we assume they advise us sincerely), but creating our own.

 

[AndrewJin]

Don't they calculate the income of China's transport investment?
It's about 50yuan per 100km per passage. Think about thousands of roaring HSR trains with every seat booked or millions of cars and trucks running on the highways everyday. All the investment might have been returned within a year or two. It's a good investment and I guess that's why China is fond of promoting infrastructure investment in other countries.

For Indians I don't suppose that you have the opportunity to enjoy the speed of connectivity, maybe not in your lifetime...

Pls bring an article here after some brainwork.

4000+ bullet per day now...distributing investment and wealth across the whole country

 

[Trying to be honest]

My simple take on this article is that, somewhere in the past when Europe was being rebuilt or USA was seeing significant infrastructure build up, its leaders would have faced the same question. And see the result of actually turning down FAI investments, average age of infrastructure in US and Europe is growing and would demand massive reinvestment in not so distant future. China may need to reallocate infrastructure growth, tone down the excesses, but should not fall into trap of going for significant reduction. Once the tap is turned down and inertia sets in, it will be difficult to start over again.

 

[TaiShang]

My simple take on this article is that, somewhere in the past when Europe was being rebuilt or USA was seeing significant infrastructure build up, its leaders would have faced the same question. And see the result of actually turning down FAI investments, average age of infrastructure in US and Europe is growing and would demand massive reinvestment in not so distant future. China may need to reallocate infrastructure growth, tone down the excesses, but should not fall into trap of going for significant reduction. Once the tap is turned down and inertia sets in, it will be difficult to start over again.

Actually China is increasing investment and infrastructure build up because labor, commodity and land costs are rising.

This is a race against time.

 

[ahojunk]

The ADB estimates an Asian infrastructure shortfall of $8 trillion over the 2010 to 2020 period. Since we have another 4 years to go, on a pro-rata basis there is still a shortfall of $3.2 trillion.

Every country should look at its own situation and decide on the infrastructure that best suits its need. China is building a massive HSR network because it believe it suits their need.

In the case of Indonesia, it has decided on the 250 kph HSR from Bandung to Jakarta. This is the correct decision as the 350 kph is not needed, the distance between stations does not justify it. Also, the 250 kph version is about 40% cheaper than the 350 kph version. This translates to cheaper tickets and resulting in higher ridership.

I believe Thailand is also looking at the 250 kph HSR mainly due to budgetary reasons.

I don't know enough about the Indian situation to comment.

By the way, the majority of Japan's HSR is running at 240 to 280 kph. Only a small section is running at 320 kph. This speed suits their needs. (They are looking at a new maglev train that runs much faster but it is still in development. It is at least a couple of decades away.)

The same evaluation should also be done for expressway and other infrastructure.

If a country builds infrastructure without proper due diligence, that infrastructure risks becoming a white elephant. Money for maintenance and regular upgrades should also be factored in.

 

[cirr]

It is time for our American friend to spend trillions of dollars on their infrastructures the state of which can best be summarized by one word: trash.

 

[Globenim]

Yes China would be so much better of if we had more corrupt corporations paying of the regime with paid speeches and election donations for public deals that make billions of profits at cost of the citizens despite a low quality and unfinished project, while also evading to pay billions of taxes and all money ending up on foreign Swiss banks of a few corrupt elite families.

 

[j20blackdragon]

In 2015, China had 7.3 billion square meters of commercial and residential floor space under construction.

Total floor space started in 2015 was 1.5 billion square meters.

Total floor space completed in 2015 was 1 billion square meters.

As as comparison, Spain's entire housing floor space stock is 1.8 billion square meters.

The West is jealous as usual. They predict a Chinese housing crash every year for the past several decades and it never happens. Why would you still listen to these people?

India adopted democracy and sucks up to the West. Your outcome is this.