Sunday, June 11, 2017

Fewer than a third of the 65 Chinese highway and rail projects examined by University of Oxford management professor were “genuinely economically productive”

See China’s New Bridges: Rising High, but Buried in Debt: China has built hundreds of dazzling new bridges, including the longest and highest, but many have fostered debt and corruption by Chris Buckley of the NY Times. Excerpts:
"China now boasts the world’s highest bridge, the longest bridge, the highest rail trestle and a host of other superlatives, often besting its own efforts.

The eye-popping structures have slashed travel times in some areas, made business easier and generated a sizable slice of the country’s economy, laying a foundation, in theory at least, for decades of future growth.

But as the bridges and the expressways they span keep rising, critics say construction has become an end unto itself. Fueled by government-backed loans and urged on by the big construction companies and officials who profit from them, many of the projects are piling up debt and breeding corruption while producing questionable transportation benefits.

For all its splendor, the Chishi Bridge, in Hunan Province, exemplifies the seamy underside of China’s infrastructure boom. Its cost, $300 million, was more than 50 percent over the budget. The project struggled with delays and a serious construction accident and was tarnished by government corruption. Since it opened in October, the bridge and the expressway it serves have been underused and buried in debt.

“Infrastructure is a double-edged sword,” said Atif Ansar, a management professor at the University of Oxford who has studied China’s infrastructure spending. “It’s good for the economy, but too much of this is pernicious. ‘Build it and they will come’ is a dictum that doesn’t work, especially in China, where there’s so much built already.”

A study that Mr. Ansar helped write said fewer than a third of the 65 Chinese highway and rail projects he examined were “genuinely economically productive,” while the rest contributed more to debt than to transportation needs. Unless such projects are reined in, the study warned, “poorly managed infrastructure investments” could push the nation into financial crisis."

"But the endless construction has also created a self-perpetuating gravy train, feeding corruption and distorting priorities.

While experts often advocate infrastructure building as a path to economic development, local governments in China “went overboard” because of corruption and other financial lures, said Huang Shaoqing, an economist at Shanghai Jiaotong University.

And as gleaming expressways and majestic bridges spread into less populated areas, the cost-benefit ratio of each new mile of asphalt drops sharply.

The Chishi Bridge, for instance, promised “a fast and convenient access to the sea” for southwestern China, a Hunan transportation official, Chen Mingxian, said in 2010, shortly before construction began."

"The Chishi Bridge was among the tainted projects. But the bridge and hundreds like it — overpriced, underused and sinking in debt — are squeezing governments across China.

The projects are often financed by loans from state-owned banks to companies owned by local governments, which collect tolls to repay the loans. But on many routes in less populous inland regions, tolls are not keeping pace with the costs, setting off a spiral of mounting debt and rising expenses.

The Chinese government estimated that expressways nationwide lost $47 billion in 2015, more than double the loss in 2014. In Hunan, expressways faced interest payments of $1.9 billion a year while taking in $1.3 billion in tolls, a deputy governor said in 2015."

"“If you don’t build roads, there can’t be prosperity,” said Huang Sanliang, a 56-year-old farmer who lives under the bridge. “But this is an expressway, not a second- or third-grade road. One of those might be better for us here.”"

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