China’s secret to economic power? Its roads and rails
The world’s second-biggest economy is the world’s biggest investor in infrastructure.
20 June 2016
CHINA SPENDS MORE ON INFRASTRUCTURE each year than North America and Western Europe combined. That’s according to a new study published last week by global management consulting firm McKinsey & Company. The fact that China is investing so much in roads, rails, ports—and everything else that keeps society up and running—hints at big trends that could shape the global economy in the coming decades.
“Infrastructure investment has actually gone down in half the G20 economies,” says Jan Mischke, senior fellow at McKinsey Global Institute, who worked on the report. The culprit was the global recession in 2009. But it hasn’t stopped China.
Between 1992 and 2013, China spent 8.6% of its GDP on building roads, railways, airports, seaports, and other development projects that are key to keep people and goods on the move, and keeping the economy strong. That same spending figure was just 2.5% for Western Europe, and 2.5% for the US and Canada put together.
“The report is an important wake-up call about the perils of under-investment in infrastructure,” says Robert Puentes, a senior fellow specializing in metropolitan policy at the Washington-based think tank, the Brookings Institution. "The super-charged growth in China's economy is fueled by these investments in infrastructure."
Europe’s and North America’s infrastructure is getting old, fast. It needs more money to be replaced, made better, and made safer. More investing also means greater environmental sustainability, more jobs, and innovation that fuels new technologies.
Last year, for example, the US Department of Transportation study revealed that more than 61,000 bridges in the country are “structurally deficient”; in 2014, US Vice President Joe Biden described New York’s LaGuardia Airport as “third world.” In 2013, the UK government announced a £100 billion infrastructure plan, saying that the UK had “for centuries been pioneers in infrastructure,” but in recent decades, “let this proud record slip.”