Tuesday, February 19, 2008

"China's Infrastructure Splurge": America in the '50s or 19th Century?

A bunch of interesting articles this week in The Economist, and there is a definite theme: Beijing is raking in the dough and beefing up China's infrastructure. In one of the articles, America's splurge the author suggests that, "Perhaps China's leaders have been similarly impressed by America's interstate highways." I'd argue that "China's infrastructure splurge," as described in Rushing on by road, rail and air, seems more similar to America's transportation infrastructure growth in the 19th century.

Poles apart notes that "According to official estimates, China's government ran a budge deficit of around 1% last year." The chief economist at China International Capital Corporation, Jiming Ha, suggests that the government probably actually has "a surplus of around 3% of GDP," which adds up to US$86.37 billion. China also has the lowest proportional public debt of any "big country," with a public debt of 17% of GDP compared to the OECD average of 77%. This gives China plenty of cash and credit to play around with.

"Rushing on by road, rail and air" chronicles the infrastructure projects:
  • Beijing's new airport terminal is bigger than all the terminals at London's Heathrow combined.
  • "The world's longest sea-crossing bridge [at 36km, 4km longer than Donghai bridge] is due to open in June."
  • Bullet trains are being cast [?] all over the mainland.
  • Yangshan port outside of Shanghai is shaping up to be one of the largest deep-water ports in the world.
  • Plans are in the air "to add another 97 airports by 2020 to the 142 China had at the end of 2006."
  • An interstate highway system that has grown to the second largest in the world.
The article explains these projects are eased along by the autonomy that Beijing enjoys and the ease with which central planners can invoke eminent domain. The major problem is that several of the projects, especially in Shanghai, reflect "a tendency to spend big money on projects of questionable value" at the expense of systems that could use major improvements, such as the bus system. On the bright side, the Ministry of Railways is considering let the market drive more of these infrastructure projects which they hope will bring in outside investors.

"America's splurge" describes the return on investment that America has seen on the interstate highway system which cost $425 billion and took 37 years:
  • In 32 of 35 industries studied costs fell 24 cents per $1 invested in the highways.
  • During the 1950s, "interstate-highway spending was responsible for 31% of the annual increase of American productivity."
But, China's infrastructure spending is about more than creating their own "Futurama" (see The Next Slum? at The Atlantic if you don't recall the New York World's Fair of '39). China's spending seems more closely related to the massive growth in infrastructure that America experienced in the 19th century; the infrastructure that united the country and turned America into a manufacturing and trade powerhouse by allowing easier transportation from the interior of the country, say the Great Lakes region. This growth turned America into a country with enough economic power to allow it to replace Old Europe after it was ravaged by the World Wars. If nothing else, Beijing is spending its money well.

1 comment:

Howard Lee said...

Great summary on the growing spending by Beijing to build up infrastructure. I remember last year carring on the 4 lane highway connecting Changsha, provincial capital of Hunan, to Changde, a city of .75 million. Pretty empty actually. But then again Changde just had its first traffic jams that year. As more and more cars hit the road in the future I still wonder if the investments are enough.

Anyway, check out the test site for the project I talked about last week. Let me know what you think, especially if you think it will help in learning how to read and recognize Chinese pictoglyphs. Its been helping me, but then I think my fluency is pretty high so I can piece together abstract meanings alot easier. Oh and what level of fluency in reading and speaking do you think are at now? I just want to know so I can see who this project helps the most.

http://tabrotherhood.com/temp/

Currently only the first chapter of the Copyright Law and General Principles are up. There are some bugs and I am working with group providing the background translation database to work those out.