Why $3.6 Trillion of Roads Will Never Be Enough
China’s massive infrastructure stimulus is a reflex that misses the supply-chain damage of the coronavirus.
Coronavirus epicenter Wuhan on lockdown in early February.
Photographer: Getty Images
With the coronavirus shutting down large parts of China, plans for big infrastructure spending to stimulate the economy are rising. But what will be built, and for whom?
The scale seems striking. Several provinces have cumulatively announced plans to build or restart around 25 trillion yuan ($3.6 trillion) of projects over the next few years. For 2020, that amounts to around 3.5 trillion yuan of expenditure. To finance this building spree, around 950 billion yuan of special bonds were issued in the first two months of the year, with close to 70% for infrastructure.
Work has resumed on more than 500 major highway and waterway projects that had been halted with the outbreak, and local governments are pushing for more. There are also some encouraging indicators as the country begins to emerge from lockdown. Factory restarts and return-to-work numbers are getting better. Rail and freight data are edging up. Machine operating rates have been rising at a faster pace than workers are returning to their jobs, suggesting a rush to show construction activity and boost sentiment.
Whether all this building actually gets done is one issue. China has large swathes of land and rural areas outside the southern and eastern regions that could use infrastructure, but they have always needed an uplift. A more pressing question is what purpose is served besides deploying money on roads to nowhere. The economy remains hung-over from excesses of past stimuli. Will one more highway in the hinterland boost car sales? Can a maglev rail line ease pressures on crippled industrial and tech supply chains?