Tuesday, December 21, 2010

AP: As U.S. Debates, China Acts with an Infrastructure Boom

Despite any real or perceived negatives of a somewhat central planned economy, no one can argue that speed of action is an issue in the Chinese economy.  With the ability to force banks to push through a massive (relative to size of GDP) fiscal stimulus in early 2009, China's economy boomeranged up... even if many bad loans were most likely made.  . [Feb 16 2009: Is China Pulling an Alan Greenspan?]   On the infrastructure side, while the U.S. will debate a project with environmentalists for a decade, and then have to deal with red tape that differs from 1 state to another - large, multi province projects in China are a relative snap. [Sep 3, 2009: Fortune - China's Amazing New Bullet Train]

Remember all that hype about "shovel ready" projects in early 2009 as the 'stimulus' was debated? (countless infrastructure related stocks shot up in late 2008 as the market tried to front run the huge infrastructure projects the U.S. was about to embark upon!)  Well it turns out much of that massive infrastructure spend ended up in tearing up and repaving roads.... heck, even the French did a better stimulus.   [Jul 8, 2009: NYT - France's Stimulus Projects, Unlike in US - Were "Shovel Ready"]  Bigger picture, many who travel overseas - especially in emerging Asia - now feel like they are landing in a 1st world country when they arrive in those countries... and a 2nd world when they land back in the States.

Via AP:

  • Gravel-laden barges glide past the willow-fringed banks of the Grand Canal, plying a trade route built 2,500 years ago to bring grain from China's fertile south to its rulers in the north.  Now the 1,800-kilometer (1,125-mile) passage is part of an even grander scheme: a $150 billion plan to bring water from the mighty Yangtze river to the parched north in what is the world's most expensive infrastructure project.
  • Increasingly, a group of rising economies -- from Brazil to the United Arab Emirates -- is building the showcase projects that once were mainly the pride of the U.S., Western Europe and Japan. America's Hoover Dam made headlines in the 1930s; today, it is China's $25 billion Three Gorges Dam.
  • Just as railways and highways transformed America into an industrial superpower, the 21st-century building boom is laying the foundations for these rapidly growing economies to join the top leagues. Half of the 30 most expensive projects globally are in China, Brazil, the Middle East and other parts of the developing world, according to a list compiled by The Associated Press. A dozen are in the rich countries, and three others are energy pipelines that will link Western Europe with Russia and Turkey. 
  • Topping the list is China's South-North Water Diversion plan, which would use the Grand Canal and two other routes to channel water to Beijing and other fast-growing northern cities. Alone, its price tag dwarfs the $65 billion for all five U.S. projects in the top 30.
  • The $65 billion in U.S. projects includes a new $20 billion air traffic control system, which ranks 13th on the list, followed by separate $14 billion projects to upgrade flood barriers in New Orleans and build two nuclear power plants in the state of Georgia.
  • Overall, just 2 percent of the U.S. gross domestic product goes to infrastructure construction. Europe spends 5 percent of its GDP, and China, 9 percent, according to a U.S. government report.
  • Developing countries, led by China, are devoting $384 billion to the biggest dams, highways, railways, bridges, canals and energy projects. Brazil is building a 518-kilometer (320-mile) $18.4 billion high-speed train link from Rio de Janeiro to Sao Paulo and an $11.3 billion hydroelectric complex on the Madeira River, a major tributary of the Amazon.
  • One country where public works construction has lagged is India, which has only one project on the list, a $9.3 billion nuclear power plant deal it signed with France this month. Many economists see weak infrastructure has one of India's biggest handicaps -- as well as a potential growth area for the world's construction industry.
More on China, who needs to keep building at apparently any cost to keep the hundreds upon hundreds of millions of newly urbanized working and content.
  • The Communist Party's routine suppression of public dissent means projects tend to get done -- and quickly.  While U.S. states are talking about high-speed rail, China is set to double its network -- already the world's longest -- to 16,000 kilometers (10,000 miles) by 2020.
  • Inevitably, some see big drawbacks to the building boom. They worry that too much construction is unwieldy, resulting in schools or clinics that collapse, and that services such as old-age homes and firefighting equipment can't keep up with rapid urbanization.
  • Continued spending at the current pace is unsustainable, said Nicholas Lardy, a China expert at the Peterson Institute for International Economics, a Washington think tank. "They're not building bridges to nowhere, but if they keep this up for a few more years they might be," he said.

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