Econ_Sep_22

The Economist

September 22nd 2018

For daily analysis and debate on China, visit

Economist.com/china

HINA does not do infrastructure by

half measures. It has the world’s lon-

gest networks of motorway and high-

speed rail (which Hong Kong joins on Sep-

tember 23rd, see next story). It has the tal-

lest bridge as well as the longest. It is

building nearly ten airports a year, more

than any other country. It has the most

powerful hydroelectric dam, the biggest

wind farm and as much coal power as the

rest of theworld combined.

But the infrastructure boom has lost

steam this year. After expanding at a dou-

ble-digit pace formuch of the past three de-

cades, investment in it has slowed sharply.

Since May spending on projects ranging

from railways to power plants has fallen

compared with a year earlier, the longest

weakpatch on record.

The question is whether this is a blip or

a fundamental change. Some analysts ar-

gue that the decline in spending is only

short-term, related to the government’s ef-

forts to rein in debt. As the trade war with

America rumbles on (see Finance), they ex-

pect that China will try to boost the econ-

omy with another burst of infrastructure-

building. But many others believe that

even if this were to be attempted, it would

notwork. Their argument is not that invest-

ment should stop. China still usefully

spendsmore in twomonths on such things

as building roads and ports and laying ca-

bles than India manages in an entire year.

a short-term squeeze. Chinese officials are

also becoming more conservative in their

planning. In July the government decreed

tough new standards for subway sys-

tems. Cities must have a population of at

least 3m to qualify for one. They must also

have their debts under control, and cover

at least 40% of building costs from their

own revenues.

In recent weeks big cities with much

healthier economies than Baotou’s have

scaled back their subway plans, too. One

example is Chengdu, the booming capital

of Sichuan province, which has produced

a revised blueprint for its transport system.

It features six fewer subway lines than had

previously been planned.

Nantong, a city about 150km north of

Shanghai, demonstrates both China’s pro-

wess in infrastructure and what seems to

be a newfound restraint. Builders are close

to completing a cable-stayed bridge (pic-

tured) that will be the longest of its type in

the world. Yet at the same time Nantong

has tempered its ambitions. Its urban cen-

tre is home to 2m people, spread over an

area larger than London, below the re-

quired population for a subway system. It

was already building its first line when the

rules came into effect, and was allowed to

continuewith that and a second one.

But even without the new edict, Nan-

tong had been having second thoughts.

The city’s traffic already flows well. Zhong

Qingwen says she is typical in getting from

her home to her office, at a medical-testing

company, in less than 20 minutes by bus.

The city had been planning eight urban-

rail lines. Their combined length of 330km

would have surpassed that of Tokyo’s sub-

way. Now the government ismovingmore

slowly. The first line will not be finished

until 2022, four years later than the original

target. Beyond the second one, further ex-

Rather, they say, buildingat an even greater

rate would risk outstripping demand. It is

time to find otherways of fuelling growth.

The recent infrastructure-spending

slump certainly relates to efforts to curb the

country’s massive build-up of local-gov-

ernment debt. Many cities had been bor-

rowing heavily, often using murky chan-

nels, to build flashy transport systems. A

crackdown on shadow banking has left

them short of funds. The central govern-

ment has also targeted spendthrifts. Last

year it ordered a halt to the construction of

a subway in Baotou, a city in InnerMongo-

lia, a northern province where govern-

ment debts are sky high.

But the slowdown is not just because of

The economy

Life in a slower lane

NANTONG

Is theworld’s biggest infrastructure boompast its peak?

China

Also in this section

38 A contested border in Hong Kong

Building up

Source: IMF

*Purchasing-power parity

Stock of government investments in fixed assets

Per person, constant 2011 $’000 at PPP*

ESTIMATE

1980 85 90 95 2000 05 10 17

China

Germany

India

Britain

United States

39 Chaguan: A tabloid’s curious role