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China’s useless infrastructure

world Updated: Jun 18, 2010 23:27 IST
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In late 2008, with the financial crisis rippling through the global economy, China’s leaders embarked on a two-year, $586 billion spending program to try to stave off a recession and keep the Chinese economy growing.

Unlike in the United States — where President Barack Obama’s large stimulus plan became the subject of protracted congressional wrangling and was shaped to include tax cuts and aid to states — Chinese leaders followed a simple mandate: Spend and build.

Forget the tax cuts; in China, it was infrastructure, infrastructure and more infrastructure.

China was already awash in big-ticket construction projects. The stimulus allowed China to speed up some projects, begin digging on others and extend the building boom to less-developed areas in the country’s west and north.

The result, 18 months after the stimulus was introduced, is an astonishing frenzy of building — highways, subways, airports, bridges, high-speed rail lines and even new cities constructed, literally, in the middle of nowhere. Among other infrastructure projects — which now amount to 15 per cent of China’s gross domestic product — are nearly 100 new airports, some serving isolated cities few outsiders have heard of, and dozens of subways.

Now a year and a half into the spending spree, and with the stimulus set to end in just six months, many economists and others here are asking pointed questions: Does China really need all this infrastructure?

“In China, we have an old saying: ‘If it’s medicine, it will have some poison inside,’” said Guo Tianyong, director of research for the Central University of Finance and Economics. “So the stimulus must have some bad effects.”

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