China is pouring trillions of yuan into infrastructure investment, a stimulus package that could benefit China, the world’s second largest economy.
Beijing is providing 6.8 trillion yuan (about $1 trillion) in government funding for construction projects, according to Bloomberg calculations based on official statements. Add in bank loans and corporate funds, and total spending can be even higher. Some estimates are three times that.
In the short term, infrastructure investment could boost employment and provide much-needed relief to millions of recession-hit job seekers. In the long run, this stimulus package will boost China’s ambitions to become a more urbanized, high-income economy that can compete with the United States in high-tech areas such as semiconductors.
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The success or failure of the project will help determine China’s prospects for the next few years.
More renewable energy than Europe
The deserts of northern China are set to host an unrivaled reserve of renewable energy. In recent months, construction of wind and solar “bases” has begun. By 2030, it will contain about the same amount of renewable capacity as all of Europe today.
The first phase, with about 100 gigawatts of turbines and solar panels, is expected to be completed by next year, with a further 450 GW phase starting this year.
“Wind and solar power bases are the main drivers of China’s renewable energy installations,” said Tianyi Zhao, China Solar Analyst at Bloomberg NEF.
According to state media, the cost of the second phase will exceed 3 trillion yuan. Ultra-high voltage power lines transport energy to the densely populated East Coast. China’s state-owned grid company plans to build 13 units this year.
Combined with investment in renewable energy and transmission, China’s total “green investment” could reach 2.6 trillion yuan this year alone, according to the Australia & New Zealand Banking Group.
World’s longest water tunnel
The construction of canals, dams and reservoirs has been stepped up, with more than 800 billion yuan to be invested in these projects this year.
The most ambitious is a 200-kilometer-long tunnel that will move water from China’s Yangtze River to a reservoir that feeds northern China, known as the North-South Water Transfer Project. It will be the longest aqueduct tunnel in the world, breaking the current Finnish record holder, and some of it will be 1km deep underground.
Wenjing Zhang and Sarah Rogers, researchers at the University of Melbourne, estimate that nationwide water-moving projects account for about a third of China’s water infrastructure spending. It is estimated that planned projects could increase the amount of water available in China by 122 billion cubic meters per year. This is about five times the amount of water Germany uses each year.
“China is quietly moving towards a highly integrated water supply network,” researchers wrote in a recent report. “A network like this would allow the Chinese government to move water on an unprecedented scale.”
The government also supports the project as it is a very labor intensive project. About 30,000 ongoing water-saving projects employ about one million workers, the country’s water ministry said.
From concrete sprawl to greener cities
Building urban infrastructure such as city roads, gas and water pipe networks, and parks is the most popular option for local government spending, which accounts for the majority of infrastructure spending in China.
The latest plans combine existing cities into one area. For example, the zone approved around Xi’an in March has a current population of 18 million he.
After decades of concrete sprawl, the focus is shifting to greener cities. Central China’s Songyahu Ecosystem New City began construction this year at an estimated cost of 200 billion yuan, but specified that 70 percent of the area would be left for green space and water. and the ratio of natural space is the same as that of Xiong’an, a city under construction near Beijing. The city has been adopted as a model by planners across the country after being endorsed by President Xi Jinping.
Another favorable investment for local governments is industrial parks, which provide low-cost facilities for businesses. Local governments spent about a third of the money they raised selling bonds to urban infrastructure and industrial parks in the first quarter, according to official data. At that rate, they could spend about 1.4 trillion yuan on such projects this year alone.
A classic example is the 20 billion yuan Qingdao integrated circuit park in eastern China. It was launched this year to help the chip industry, which has become a national priority due to US sanctions.
However, success is not guaranteed.
“Regions are competing with each other through various incentives, such as free office space or free factory space, or at least subsidies,” said Stewart Randall, a China-based semiconductor analyst at Intralink. rice field. But “there are already a lot of vacant offices,” he said. “What they need more is intellectual property, labs and talent.”
More than double the world’s high-speed rail
China already has 40,000 km of high-speed rail, more than double the rest of the planet combined, and dozens of high-stakes projects are still underway.
The most ambitious is a 1,629 km line from the southwestern province of Sichuan to the Tibetan capital of Lhasa, climbing more than 3,000 meters through seismic-prone terrain and glaciers. It is expected to be completed by 2030. The total cost of the entire project is about 320 billion yuan.
China plans to build 70,000 km of high-speed rail by 2035 this year. However, this actually means that the amount of track being built each year is down by about 40% compared to the pace set over the last five years. In other words, while China continues to outpace the rest of the world in rail spending, that spending could decline over time.
The same goes for highways and subways. China plans to build or restore 58,000 km of highways by 2035, indicating a sharp slowdown in the annual pace of construction compared to the past five years. One of his routes under construction includes the 1,176-meter-long Changtai Yangtze River Bridge (the world’s longest road and rail suspension bridge).
Chinese cities are still adding subway lines at a rapid pace, but national spending peaked at 629 billion yuan in 2020, according to the China Metro Association.
400 billion yuan per year in data centers
As part of its efforts to build a more digital economy, China’s “East Data West Computing” plan includes the construction of huge data centers in poorer western provinces to hold data generated by eastern-based internet companies. including building a data center. It costs about RMB 400 billion annually to build eight data center clusters. Most of them are from state-owned telecommunications companies.
Mercator China Institute analyst Jeron Grunewegen Lau said the plan “defies the logic of the market.” The tech companies “want to process data close to most of their customers,” he wrote in a memo on the scheme, adding that the benefits were more than financially captureable for Beijing.
“The central government sees the construction of data centers as a way to spread the benefits of the digital economy beyond developed coastal cities, with the added benefit of better protecting China’s domestic market from external shocks. he said.