China's infrastructure splurge

Rushing on by road, rail and air

Feb 14th 2008 | BEIJING
From The Economist print edition

China's race to build roads, railways and airports speeds ahead. Democracy, says an official, would sacrifice efficiency

“IT'S like approaching the Forbidden City, it's absolutely incredible.” The adjective is one that Mouzhan Majidi, chief executive of Foster + Partners, liberally attaches to Beijing's new airport terminal, designed by his British firm. The world's largest, designed in the gently sinuous form of a Chinese dragon, it was planned and built in four years by an army of 50,000 workers. “The columns on the outside are red and you see them marching for miles and miles,” says Mr Majidi.

A little hyperbole is understandable. The terminal is 3km (1.8 miles) long. The floor space is 17% bigger than all the terminals at London's Heathrow combined (including about-to-open Terminal Five). Chinese officials like the Forbidden City analogy. Just as the towering vermilion walls and golden roofs of the imperial palace inspire visitors with awe, China wants its golden-roofed terminal to impress those arriving for the Olympic games in August. Part of a $3.8 billion expansion, which included the opening of a third runway in October, it is due to open on February 29th, weeks ahead of schedule.

The new terminal is not merely window-dressing for foreigners. Beijing badly needs to expand its handling capacity. In 2002 the airport ranked 26th in passenger numbers worldwide. Now it is the ninth busiest. China's rapid economic growth and equally rapid integration into the global economic system is putting huge strains on its infrastructure. This has led to a spate of spending on transport. Between 2001 and the end of 2005 more was spent on roads, railways and other fixed assets than was spent in the previous 50 years. According to the state media, investment will see double-digit growth every year for the rest of the decade. Between 2006 and 2010, $200 billion is expected to be invested in railways alone, four times more than in the previous five years.

Superlatives abound. The world's longest sea-crossing bridge is due to open in June: a 36km six-lane highway across Hangzhou Bay (about the same length as the undersea portion of the Channel Tunnel linking Britain and France). This will halve travel time between two of China's busiest ports, Ningbo and Shanghai, to about two hours. Shanghai itself is home to the current world-record holder for such a structure, the 32km Donghai bridge. This was opened less than three years ago to link the city with Yangshan port, now being built on two flattened islands. Yangshan is intended to be one of the world's biggest deep-water facilities when completed at some point after 2010.

From August the 115km journey from Beijing to Tianjin, its nearest port, will be reduced to half an hour with the inauguration of a bullet-train link, China's fastest intercity rail service. There are big plans for bullet trains. Work began in January on a 1,300km line between Beijing and Shanghai that, when completed in five years' time, will reduce rail time between the two cities from ten hours to five—and thus be a competitive alternative to flying.

At $30 billion, the Beijing-Shanghai high-speed line is the most expensive project in China's railway history. But with cash to spare the government, which is reportedly shouldering nearly 80% of the cost (with a consortium of insurance companies providing much of the rest), is pushing ahead after years of debate over what technology to use and how much to spend on it. By comparison China's construction of a conventional line (but the world's highest railway) from Golmud to the Tibetan capital, Lhasa, which was completed in 2006 amid much self-congratulation over its technological accomplishment, cost only $4 billion (or so officials said: infrastructure price tags are subject to little scrutiny in China and overruns are rarely reported publicly).

More prosaic but cumulatively no less remarkable projects abound. Fifteen years ago intercity travel was often a choice between slow, crowded trains or a perilous journey by car or bus on narrow rural roads (flying was for the privileged; until 1993 buying a plane ticket required a letter of authorisation from an employer). But since the 1990s China has built an expressway network criss-crossing the country that is second only to America's interstate highway system in length (see article). By the end of 2007, some 53,600km of toll expressways had been built. The pace of construction will now be slowing a bit, but the aim is to have 70,000km of expressways by 2020. The Ministry of Communications (which is responsible for roads) boasts that China's expressway builders achieved in 17 years what the West took 40 to accomplish.

Oh for the open road

The expressway network has helped divert some of the freight traffic from the overburdened railway system. It has also—to the delight of China's burgeoning car industry but to the horror of environmentalists—helped to promote a sharp increase in private car ownership. The Asian Development Bank (ADB), which financed part of a 660km expressway linking Beijing with Shenyang in the north-east, found that the new toll road was little used after its completion in 2000. Now, says an ADB official, traffic flow (and therefore revenue) far exceeds initial predictions thanks to the growth of industries near the route and the increasing use of private cars for long-distance travel.

It is not just expressways that are getting attention. In 2005 China's leadership launched a programme to build what it called a “new socialist countryside”. This was an effort to assuage discontent in the countryside over the widening gap between rural and urban incomes and public services. The programme includes the planned construction of 300,000km of new rural roads between 2006 and 2010, an increase of nearly 50%.

Investment in railways has been far slower to gather pace. In southern China the worst snowstorms in decades paralysed much of the network in late January and early February. But the rail connections between north and south were already inadequate. Much of the south's coal supply is sent by rail from northern mines to the coast and then loaded onto ships. The World Bank says that China's railways carry 25% of the world's railway traffic on just 6% of its track length.

But change is coming. In the past couple of years investment has grown considerably. This year's target is $42 billion, compared with a total of $72 billion in the preceding five years. World Bank officials call it the biggest expansion of railway capacity undertaken by any country since the 19th century. China had 78,000km of track at the end of last year. The original plan, published in 2004, was to increase this to 100,000km by 2020. Last October this was revised to 120,000km (and officials now say the target will be met by 2015). Even sticking to the 2020 target, this will mean laying 60% more track in the next dozen years than was built since the start of the economic reform programme 30 years ago. Huang Min, the Ministry of Railways' chief economist, says that by 2020 the railway system's freight-handling capacity should be greater than demand. At present, he says, it can handle only 40%.

Mr Huang reckons that railway expansion will bring down logistics costs, which he says amount to 18% of GDP in China compared with 10% in America. It will also help reduce pollution, he says, since fewer polluting lorries will be needed.

Aviation facilities will expand rapidly too. The increase in air passenger traffic has been dramatic: from 7m passengers in 1985 to over 185m in 2007. To deal with this rise, the government announced last month that it planned to add another 97 airports by 2020 to the 142 China had at the end of 2006. The number with an annual handling capacity of over 30m passengers will grow from three to 13.

There will also be a huge expansion of seaport capacity. The government predicts container throughput will increase by 85% between 2010 and 2020.

In all this activity it greatly helps to have a secretive planning bureaucracy and a government that brooks little dissent. In Britain, as Mr Majidi points out, it took as long to conduct a public inquiry into the proposed construction of Heathrow's Terminal Five as it took to build Beijing's new airport terminal from scratch.

There was no consultation with the public on the terminal. Nor was there any public debate about the construction of Beijing's third runway, notwithstanding the noise pollution already suffered by thousands of nearby residents. Beijing is now planning a second airport (even with Mr Majidi's terminal, the current airport is expected to exceed its designed capacity of 60m passengers this year, seven years before schedule). The location is being considered in secret. Xu Li, an official at the Ministry of Communications' transport research institute, agrees that China's infrastructure expansion is not as restrained by rules as it is in America. Once a plan is made, it is executed. “Democracy”, she says, “sacrifices efficiency.”

An often heavy-handed approach to land appropriation also helps. For Beijing's airport expansion, 15 villages were flattened and their more than 10,000 residents resettled nearby. But several of the former farmers told your correspondent that they were still barred from the unemployment benefits and other welfare privileges of city dwellers even though their farmland had been grabbed from them. One elderly man said that officials had threatened them with violence if they refused to leave their villages.

No tree-huggers permitted

Another factor is the hazy definition of who owns rural land (see article). Local officials tend to regard it as the government's and readily seize it—often for little compensation. In a recent study of China's transport, the World Bank says that roads are sometimes built expressly for the purpose of converting countryside into revenue-generating urban land. This causes a rapid outward expansion of cities, which combined with a lack of adequate public transport increases dependence on private cars. Beijing's polluted air and congested streets, to which 1,000 cars are added daily, are evidence of the problem.

Some of China's grand plans for the coming years may encounter a bit more resistance. In urban areas a property-owning middle class that hardly existed a decade ago is now growing rapidly. Some of its members are becoming increasingly vocal in their demands for more open decision-making, particularly when it comes to projects that might affect property values.

In China's biggest-ever urban protest against a transport-related project, thousands of Shanghai residents gathered outside the city government's headquarters in January to demand the cancellation of plans to extend a Maglev (magnetic levitation) train line through the city's main urban area. The existing Maglev line was opened with much fanfare in 2003 as the first commercial service of its kind in the world. It provides a 30km ride at astonishing speed, peaking at 420kph, from the city's Pudong airport to a rather inconvenient spot on the city's outskirts. The government wants to link it with the city's other airport, Hongqiao. But many residents along the route say they are fearful of noise and radiation from the trains.

Many also question whether the Maglev will ever be much more than an expensive joy-ride that tourists will take once, just for the thrill of it. Shanghai has had a tendency in recent years to spend big money on projects of questionable value. The billions of dollars spent on Yangshan port and its cross-sea bridge might well have been better invested in expanding existing, and far more convenient, deep-water facilities in nearby Ningbo. The opening of the Hangzhou Bay bridge this year will make Ningbo's port all the more accessible to Shanghai. But cities in China have a poor record of co-operating, particularly when they belong, as these two do, to different provincial administrations.

Olympic swank

A show-off tendency among Chinese urban planners (as well as a dire lack of suburban rail networks) has helped to fuel a rapid expansion of costly underground railways. In some cases, says the World Bank, this is diverting resources away from urgent needs in the bus systems. Two decades ago only two cities, Beijing and Tianjin, had subways (and only three lines between them). Now 15 cities are building them at a total cost of tens of billions of dollars. Beijing and Shanghai are leading the way, spurred on by their desire to impress the world at the Olympic games and, in Shanghai's case, the World Expo which it will host in 2010. Beijing's official Olympics website displays a story saying that the city will have the biggest underground network in the world by 2015.

ReutersNot everyone is pleased

Complaints still abound about the way things work. Highways—both expressways and other intercity roads—are studded with traffic-slowing toll booths. China reportedly has 70% of the world's tolled roads and its tolls are the highest in the world (using exchange rates adjusted according to currencies' purchasing power). To cut costs, lorries routinely overload. This helps to make the roads among the most dangerous in the world (89,000 deaths in 2006 by official reckoning; the actual number may be much higher). And it pushes up the cost of maintaining them.

The construction of expressways has been speeded up by making the provinces shoulder the costs. This they readily do, using toll revenues to repay construction loans provided by state-owned banks (the banks happily roll over debts that are not repaid on time). But this decentralisation makes it difficult for the central government to order an end to tolls or impose limits on them. A member of a district legislature in Beijing, Li Shuyuan, has been fighting a high-profile campaign for an end to tolls on one of the city's expressways which has long since repaid its loans. In 2002 she and her supporters won a rare victory by getting the city government to persuade the expressway operator (which the city owns) to reverse a toll increase. But both the government and operator refuse, she says, to budge further.

The railways' problem is that they are still highly centralised and the central government is unwilling to shoulder the whole cost of its massive expansion programme. The Ministry of Railways is also now turning to provincial governments as well as to companies (including private ones) and the stock markets for funds. The ministry's Huang Min says that railways in the booming east of the country could be run “according to market principles”. Investors, he says, will be attracted by the huge pent-up demand and “appropriate” increases in freight tariffs and passenger fares. Sceptics wonder whether the hidebound ministry will give market forces the leeway it says it will. And big fare increases would not go down well with passengers whose complaints about overcrowded, uncomfortable and corruptly managed train services are legion. But talk of reform is getting louder.

Strong political will may have helped what one World Bank adviser calls China's “mind-boggling” pace of rail and road construction. But even the Communist Party's resolve may not suffice for what would be the most jaw-dropping project of all. A plan published by the Ministry of Communications in 2004 mentions, off-handedly, an expressway from Beijing to Taipei (target completion date: 2030). How the road would traverse the 150km Taiwan Strait is not mentioned. Nor does the document suggest how to tackle the even bigger problem of reaching agreement with Taiwan. But government maps of the completed expressway network show it. It would be unwise to rule it out.