When it comes to building infrastructure,such as bridges,roads,railways and power plants,China easily claims the worlds top prize. Each year,the country spends more than $500 billion,or 9 per cent of its GDP,on infrastructure,compared with 5 per cent of GDP in Europe and 2.4 per cent of GDP in the United States. With such massive investments,China has achieved a unique distinction. It may be a low-middle income country with a per capita income that is one-tenth that of the US,but its first-world infrastructure puts Americas decrepit bridges and railways to shame.
For the Chinese,who built the worlds largest infrastructure projects the Great Wall and the Grand Canal more than a millennium ago,nothing is left to chance this time round in terms of maintaining their lead in erecting monuments that convey an unmistakable impression of Chinas rising economic prowess. To celebrate the 90th birthday of the ruling Communist Party,China opened the worlds longest sea bridge,the 42-km Jiaozhou Bay Bridge,and launched the Beijing-Shanghai highspeed railway service,which makes the 1,318-km journey in less than five hours.
This may be true. Indeed,India needs better infrastructure to improve the livelihoods of its own people. But it would be a mistake to view Chinas lead in infrastructure development as a sign of Chinese strength. It would be an even bigger mistake trying to use Chinas infrastructure as a benchmark of sound economic development or an achievement to emulate.
What is often overlooked in the discussion on infrastructure development in China is whether the countrys massive spending has been cost-effective. The economic benefits of Chinas infrastructure spending spree are asserted or assumed,rather than proven through careful analysis. To be sure,as a developing country,China has huge needs in terms of infrastructure. But that does not mean that China should spend indiscriminately on infrastructure,regardless of its economic costs and benefits.
In a one-party political system which has enormous capacity for resource mobilisation but little political accountability,the infrastructure sector is the most liable to political manipulation,waste and corruption. Specifically,autocratic regimes throughout history are fond of building huge monuments to celebrate the power of the state and its rulers (democracies are much less susceptible to this urge). Because autocrats usually can tax the people heavily and seize their property with little or no compensation,they have access to more resources (money and land) to construct trophy projects symbolising and legitimising their power. For autocratic rulers,spending public money on costly infrastructure projects produces significant private returns as well because they can easily steal from such spending. Viewed from this perspective,autocracy and infrastructure are a match made in heaven.
Back on earth in China,the countrys political system is custom-designed for massive infrastructure spending. Because such spending increases GDP growth,which legitimises the Communist Partys rule,it naturally becomes a top priority for the regime. In addition,because the Chinese state has unmatched capacity in mobilising the countrys savings and faces no legal constraints in forcibly evicting people from their land and homes,building infrastructure in China is much faster and less costly (since farmers and urban residents are under-compensated for the loss of their land and homes). As local officials are evaluated and promoted on their ability to deliver GDP growth and physically transform their cities and towns,there is fierce competition within the Chinese officialdom in trying to build the biggest show projects. Indeed,those who visit Chinese cities are always impressed by the beautiful landscaping and spacious public squares in front government buildings even though such spending is a total waste.
Finally,because public spending in a one-party state is shrouded in secrecy,the infrastructure boom inevitably breeds enormous corruption. Official reports admit that corruption related to infrastructure is the largest single cause of official malfeasance. In Chinese provinces,more than two-thirds of the provincial transportation chiefs (who are in charge of building highways) have been sentenced to death or life imprisonment because of corruption.
Besides the corrosive impact of the infrastructure boom on the integrity of the political system,China is paying a huge economic price as well. First,China may be good at expanding the quantity of its infrastructure,but its quality remains questionable. Take the newly finished highspeed railway network (the worlds biggest),for example. The alleged use of substandard materials has raised safety concerns and forced the government to lower the speed from 350 km to 250-300 km an hour. The Jiaozhou Bay Bridge is dogged by similar allegations of poor workmanship.
Second,many infrastructure projects have dubious economic benefits but harmful environmental impact. The mammoth Three Gorges Dam,which has cost more than $30 billion according to the Chinese government (the real tab is likely much higher),is such an example. No reliable cost-benefit analysis has been performed for this project. In the meantime,the dam has played no role in mitigating drought or flood. On the contrary,the reservoir has been severely polluted and is blamed for unusual weather patterns,landslides and earthquakes in the region.
The most damning evidence that massive infrastructure spending in China is wasteful surfaced last month. The Chinese government admitted in late June that local governments had borrowed debts equivalent to 27 per cent of GDP in financing infrastructure projects,many of which will not be economically viable. Indeed,the huge debt accumulated by the Chinese state on its infrastructure binge has become a huge financial risk for the country.
So when you marvel at Chinas glittering highspeed trains and soaring buildings,you should ask a simple question: is this money well spent?
The writer is a professor of government at Claremont McKenna College in the US
express@expressindia.com
