China’s Infrastructure Projects

Overview

Targets set out by the Chinese government have recently focused on infrastructure projects. Amid high competition from other Asian countries such as India economically, infrastructure should be an area which sets China apart.

Article Highlights

  • Unlocking economic growth through infrastructure
  • Large ambitious projects nearing completion
  • Worldwide reach

The Direct China Freight Train

London to China. A distance of approximately 5058 miles if covered by air. Aeroplanes are able to fly this distance without requiring a stop-off. However, it is quite surprising of recent news that China has launched a direct rail freight service doing the same trip.
In 2013, the Chinese government set out a strategy aiming to boost links between Europe and China. Targeting the former Silk Road route, this direct freight train sees London become the 15th European city to become connected.

Many advantages have materialized to international shippers from China. The journey this service makes would be cheaper than air freight and faster than sea freight. Providing a cost effective alternative to these traditional methods should see the freight train service become extremely popular.

Advantages result from the route the service takes. Originally starting in Yiwu, China, the service will pass through Kazakhstan, Russia, Belarus, Poland, German, Belgium, France and finally London. Ultimately, it has created a strong infrastructure link between China and Europe. Knock-on benefits will include a potential economic boost in the contrasting slowing export climate.

Chengdu High Speed Line

China is continuously planning jaw-dropping infrastructure projects. Another includes the Chengdu high-speed line due to open later this year. Amazingly, this track travels directly through the Qinling mountains, across bridges and through tunnels. Upon completion, Tin Mountain tunnel will be the longest double-track tunnel across the whole of the Chinese high-speed network. In total, the track spans almost 16km. Highlighting the dedication the Chinese government has to bringing their infrastructure up to first world standards.

Baltic Pearl Project

The Baltic Pearl Project is the largest investment project by Chinese firms initiated outside the country. Mainly backed by the Shanghai Industrial Investment Company, using funds raised by the Shanghai municipal government, the project is sheer in size.
Situated just outside St Petersburg, Russia’s second largest city. The Baltic Pearl Project will house 35000 residents, as well as shopping centres and public buildings. In figures, this will be 14000 apartments and over 600,000 sq meters of real estate. Russian residents are the beneficiary of this Chinese infrastructure project. However, China has still benefited greatly from financing the project, and it highlights the international reach of Chinese companies.

China’s Infrastructure Projects: A Threat to Economic Growth?

Certain analysts believe that China’s infrastructure projects may actually be harming economic growth. The benefits that infrastructure investment can bring is undisputed. However, a study conducted by the SaÏd Business School suggests the majority of infrastructure investment in China is low-quality.

Projects ballooning over initial estimates and low utilisation appears to be the main two problems. Construction costs on average were 30% higher than estimated, which is consistent with global statistics. The Chinese economy may face problems from high debt levels. Debt is the common way to finance infrastructure projects. Struggling projects may not see a worthwhile return on the initial investment.

Closing

Many other infrastructure projects are currently taking place within China. The Tianhuangping hydroelectric project will be supply large amounts of power to eastern China. The Kashgar-Hotan Railway will connect cities and towns in the Basim Tasin region. Other projects include the recently completed Qinling Tunnel, stretching for 11 miles underneath Zhongnan mountain.

Continuously the Chinese government are not afraid to invest within its own country, and even beyond. Projects ambitious in size and exciting in nature are announced frequently. Setbacks do occur. Cutting of red tape also happens regularly for finalised projects. If China wants to continue economic growth, the biggest concern is rural infrastructure. Major cities are receiving the spotlight, and most infrastructure projects are within the major metropolitan areas. However, just shy of 50% of all Chinese citizens are outside of cities. To unlock their potential, it may be worthwhile to invest more to connect these areas and help stimulate economic output. Furthermore, high quality infrastructure investment needs to become a larger priority. Poorly planned projects which exceed cost-estimates and become under-utilized will be a large unneeded expense detrimental to economic growth.

Further information about China’s infrastructure can be found in our Trade Wiki here