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City lights
China Unveils Massive Infrastructure Plan

China has just released plans for a gargantuan urbanization project that aims to move 100 million people to its cities by 2020. That’s the equivalent of a third of the U.S. population. The plan covers the massive infrastructure improvements needed to accommodate the new urban dwellers, as the FT reports:

As part of the planned infrastructure construction, the government plans to ensure that every city in China with more than 200,000 residents will be connected by standard rail and express roads by 2020, while every city with more than 500,000 residents will be accessed by high-speed rail.

New airports will be built to ensure that the civil aviation network covers about 90 per cent of China’s population.

The plan also calls for the redevelopment of 4.75m household units in rundown shantytowns this year alone, with an expected total cost of Rmb1tn ($163bn), according to state media reports.

Putting this kind of muscle behind housing, urbanization and development projects looks like a tacit admission that China has not yet found a way to break with it’s investment-driven model for economic growth. The influx of cash and new jobs will stimulate the economy in the short term, but, as Tyler Cowen has noted, these oversubsidized investments may not serve China well in the long run:

At first, they create lots of jobs and revenue, but as the business cycle proceeds, new marginal investments become less valuable and more prone to allocation by corruption. The giddy booms of earlier times wear off, and suddenly not every decision seems wise. The combination can lead to an economic crackup — not because aggregate demand is too low, but because the economy has been producing the wrong mix of goods and services.

The project presents possibly the greatest opportunity for corruption in the history of the human race. With contracts to be won, auctions to be held, and licenses to be given out, there are enormous opportunities here for local officials and politically connected companies to make out like bandits. The graft in Chinese bureaucracies suggests that they will.

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  • Jacksonian_Libertarian

    Free Markets are the most efficient way to allocate resources, when some bureaucrat thinks he knows how it should be done he is invariably wrong. We can expect a lot more empty cities and buildings in China because they were built where there was no demand, only corrupt pockets to fill.

  • S.C. Schwarz

    China’s current population is estimated to be about 1.4 billion. (Source:

    Therefore 100 million would be about 7 percent not even close to 60 percent.

  • Atanu Maulik

    Does China have the money for more bad loans ?

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