Two Chinese infrastructure problems | FT Alphaville

Two Chinese infrastructure problems

It’s not just excessive investment, particularly the fixed-asset sort, that’s a problem in China. It’s the wrong kind of investment that is the issue — projects that are simply uneconomic.

Exhibit 1: a somewhat ambitious airport-building programme, which is vexxing Gordon Chang:

By then, China will have 230 airports, up from the current 182, according to Huang Min, director of infrastructure at the National Development and Reform Commission.  Most of the new facilities will be feeder airports in the central and western portions of the country.  About 80% of the population will be within 100 kilometers of an airport by the middle of this decade.  Additional building is projected to increase that percentage nine points by 2020.

Chang goes on to ask if China really needs all those airports and you can probably guess his answer to that question.

(In case you can’t: we noted this previously, but a couple of months ago Civil Aviation Administration of China’s director, Li Jiaxiang, mentioned that two-thirds of China’s existing 180 airports were unprofitable in 2011, to the collective tune of Rmb2bn. Update: We should mention that Li also said airports in aggregate were profitable to the tune of Rmb5.3bn.)

That doesn’t mean that all infrastructure investment in China is excessive. In fact for reasons that are far beyond the realm of this blog, some parts of urban China might be in need of some serious infrastructure investment.

Exhibit 2: A flood in Beijing in which 37 people lost their lives at the weekend, prompting anger from residents about the apparently poor state of the city’s sewer system which they believe worsened the effects of the weather event. From the WSJ:

“Beijing’s glossy appearance can’t withstand the erosion of a bout of heavy rain,” wrote another Sina Weibo user. “In just a few hours, Beijing is washed back into the old days. The city government hasn’t stopped rebuilding this city, but they can’t even deal with getting waterlogged.”

And herein lies one of the many contradictions at the heart of China’s massive infrastructure — and by extension, its rapid growth.

It’s perfectly possible in a “state capitalist” economy to build airports that no-one wants to use — a whole network of them in fact. You can raze entire villages and replace them with a high rise (destroying the villagers’ original buildings is actually quite a good way of ensuring sales of the newly-built apartments, it turns out).

But if even the best-established of your cities lacks infrastructure able to withstand a heavy downpour, does that mean you’re developed?

Umm… maybe?

(H/T Bill Bishop’s Sinocism)

Related links:
How China can keep urbanising – with flat steel demand – FT Alphaville
China’s mini stimulus, explained – FT Alphaville