Not to be outdone by the United States (US), the Chinese government has compiled a list of thousands of large infrastructure projects that must be completed immediately. Its value is projected to reach trillions of United States (US) dollars.
Based on Bloomberg analysis, China's planned investment will reach 14.8 trillion yuan, equivalent to US$ 2.3 trillion in 2022. This value is more than double the US infrastructure package which will reach US$ 1.1 trillion in 2021.
Just so you know, the majority of US infrastructure spending goes to transportation, water, and digital infrastructure. Meanwhile, China, which already has more than double the high-speed rail and the longest freeway network in the world, has a different composition of infrastructure construction.
Where, only about 30% of the project's budget is for traditional infrastructure, such as roads and railways. More than half of it is geared towards supporting manufacturing and service industries such as factories, industrial estates, technology incubators, and even amusement parks.
"Now that China has a basic modern infrastructure, it makes sense to focus investment on manufacturing," said Nancy Qian, a professor at Northwestern University's Kellogg School of Management at Northwestern University.
This reflects China's commitment to ensuring China maintains its dominance in the global manufacturing market share, even as China shifts to more advanced fields such as electric vehicles and batteries, renewable energy and microchips.
One of China's projects is the 2.2 billion yuan expansion of the Zhongguancun Dongsheng science and technology park to host a new generation of technology startups.
In addition to absorbing many workers, the infrastructure development is also to ensure the central government achieves the economic growth target of 5.5% set for this year.
As is well known, China's stock market was hit by a regulatory crackdown on technology companies with internet platforms and a massive shock in the property sector. The main index is already down 13.4% so far this year, but the subindex that tracks infrastructure-related companies is only down 4.7%.
The Chinese government then provided a stimulus to support the global economy, by encouraging Chinese imports. However, this has exacerbated commodity inflation at a time when many countries are facing rising energy prices due to Russia's invasion of Ukraine.
In the long term, these are large projects that take three to five years to complete. Because the global impact has affected the production of Chinese factories because supply is limited and prices have gone up.
From an environmental perspective, China waives energy efficiency requirements for the development of these projects. This is in contrast to some of the recent investments in renewable energy which limit greenhouse gas output in the long term.
The construction push is a change of direction for the Chinese economy. The pace of infrastructure investment has fallen gradually over the past decade, guided by policies imposed by Beijing to curb high debt levels.
Last year's growth was just 0.4%, compared to nearly 20% annually a decade ago. Former World Bank chief economist Justin Lin expects the trend to reverse.
"If you take the opportunity to invest in infrastructure to reduce congestion, then it will increase productivity and can increase government revenue," Lin said.
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