Explainer: How China Funds Its Massive Infrastructure?

It is now widely accepted that infrastructure investments have been one of the main drivers of China’s rapid economic growth. This naturally leads us to ask a few questions. What have been its financing sources? Who have been the major infrastructure developers?

One study has found that “for over half of the infrastructure investments in China made in the last three decades the costs are larger than the benefits they generate, which means the projects destroy economic value instead of generating it”. It also found that “there was a 31% overspend on these projects on average”, and “three-quarters of the projects in the study suffered cost overruns”.

This points to the Chinese infrastructure investments being no less immune from the problems that afflict large projects. The case of China is a classic study in the dangers of over-reliance of state in matters of critical infrastructure needs of the country. When state overreaches and acts as the monopolist in infrastructure, these difficulties are bound to arise in states like China.

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#China #Infrastructure #LocalGovernment #Evergrande #Finance #State #CPC