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Dr Liu Youfa, Consul General of China in Mumbai explains how China´s infrastructure growth strategy has been tailored to boost all-round national economic development.
China is ahead of other BRICS countries in building large-scale infrastructure. What is the strategy that the government adopts in planning them? How does it follow up with positioning the right industries, so that the infrastructure is rendered fruitful?
Large countries need comprehensive strategies to sustain their long-term development, especially in terms of infrastructure. China is no exception. Currently, China has 4.5 million kilometers of public highways in operation, of which more than 100,000 kilometers are high-speed highways. China has more than 100,000 kilometers of railways in operation, out of which 11,028 kilometers are high-speed railways. In short, the comprehensive infrastructure networks have been providing steam to sustain China´s rapid economic and social development over the past 30 years. Meanwhile, the said networks have been serving as the bridges for China to out reach to the world, and for the latter to come to the former.
Basically, China´s national strategy in the field of infrastructure caters to the following aspirations: Firstly, it is to connect all the cities, towns and villages into a ¨national village¨, within which people can enjoy convenient accesses of transportation and information service, and enterprises can enjoy ¨an¨ convenient services in terms of power and energy supply, transportation and information service. Secondly, it is to effectively connect the urban markets and the rural markets which would, in turn, expedite the flows of factors of production, and from which all other economic sectors can take stock. Thirdly, it is to address the imbalance of development between the urban areas and rural areas, that between coastal areas and heartland areas, and that between the eastern areas and western areas. Last but not the least, it is to connect China with all the neighboring countries first, and with countries in Europe, Africa and North America eventually, in an effort to speed up China´s economic cooperation and integration with as many countries as possible on the bases of mutual benefit and win-win outcome.
What plans are afoot to augment China´s rail infrastructure?
As you are aware, China has been implementing an ambitious blue plan to build up a national high-speed railway network which is to compose one ring network, eight east-west high-speed railways and 10 south-north ones. The above mega project would evolve an input of billions of dollars, which would be financed by the Chinese government, domestic and foreign financial institutions, and domestic and foreign engineering companies respectively. As China and India have established strategic partnership relations, Indian construction companies are certainly welcome on board.
It is true that rail infrastructure construction is capital and technology intensive, but it is one of the pillar industries to sustain economic and social development of all major nations. China is no exception. Over the past two decades, the Chinese government has been implementing a national strategy to speed up infrastructure construction, especially rail construction. The specific plans are as follows. First, it is to regard railway, especially the high-speed railway industry as a strategic industry, since it would provide steam for many other industries in the long run. Secondly, it is to effectively connect all the cities across the country with population of more than half a million, rendering transportation directly to more than 90 per cent of the people. That is part of the effort by the Chinese government to build up a harmonious society nationwide. Thirdly, it is to facilitate hardware support for the country to realise sustainable economic development since the railway network would further speed up the flows of goods, services, information and human capital. Last but not least, it is to expedite the process of modernisation which is benchmarked by further elevation of productivity, further increase of competitiveness, and further elevation of the living standards of the people.
Shenzhen has turned out to be an infrastructure showpiece for China. What lessons can Indian SEZs learn from Shenzhen´s success?
It is true that Shenzhen started from a cluster of seven villages 30 years ago, and has now become a metropolitan city of 14 million, which is a miracle and success story from any perspective. As a resident diplomat, I appreciate the efforts by the Indian government at all levels to expedite the construction of special economic zones which would become new powerhouses for both the federal and state economic development. In order to expedite the above process and achieve tangible results, the relevant Indian governments should choose strategic locations for the Special Economic Zones. The SEZs should have potentials to become cities in the mid- and long-term, which would require land areas measured by square miles, rather than by acres. Relevant governments should bear more financial and policy responsibilities in terms of land acquisition and infrastructure construction. We have a saying in China, when you build up the nest, birds will come to lay eggs. There should be a more open policy for both domestic and foreign stakeholders to participate in the above process. Of course, the relevant administrative authorities are to promise and carry out more prompt services to the participants before, during and after the projects or enterprises are materialised. More importantly, there should be a strict environment guideline for all the projects and enterprises in the designated SEZs.
Is PPP on China´s agenda? Do you believe more private participation in financing and running your projects can enhance their efficiency, or will it hamper them?
PPP has been proven to an effective modality for the public and private sectors to join hands in carrying out industrial development, especially in large-scale project construction. China also learned to incorporate this vehicle later on in infrastructure development. It is my firm belief that PPP would definitely lessen the financial burden of the government in terms of major plans. It would set the stage for more stakeholders so that the relevant authorities could select and award the project to the best bidder. We all know that more participants would result in more oversight on the relevant authorities which would help to set leverage on corruption. In terms of efficiency, private sector participants usually attach more importance to capital input and management, which would result in more efficiency.
What are the main issues China´s infrastructure industries (road, rail, ports and airports construction, power, urban infra) face?
China is faced with quite a few issues in terms of infrastructure development. First and foremost, it is the scarcity of land,which means more encroachment on the arable land. This is a paradigm that China has to resolve. Second, it is availability of finance, which is more difficult to find. Third, it is the critical issue of environment. How to balance the modernisation and environment preservation and protection has become another dilemma for the Chinese government to tackle. Finally, it is the issue of input and output. All the major projects have been carried out on commercial basis. How to recover the investment in the projected period remains a tall order on the relevant authorities.
Why has China not been a big investor in India so far? Between April 2000 - December 2013, it has been reported that it has invested $0.313 billion against Japan´s $15.3 billion...
First, please allow me to make it clear that China currently is the largest trading partner with India, with the two-way trade flow totaling (approximately) $64 billion in 2013, and India has been the largest trading partner for China in South Asia. This is also one way of investment, to say the least. As for direct investment, Chinese investors also follow the basic economic principles. They would lay their economic eggs where they would generate more trade opportunities. Right now, the two-way trade accounts for about 1 per cent of China´s total foreign trade.
Secondly, the Chinese investors would invest where they could easily find local partners for accessory component parts and relevant services, which are still hard to find here in India. Thirdly, the Chinese investors would go into the market where there is adequate infrastructure. More importantly, the Chinese investors are yet to be accorded with national treatment, who are barred with ¨glass doors¨ of various kinds. Finally, I have to mention that the biased security screening mechanism has barred many Chinese companies from the equal opportunities to come into the market, which is increasingly producing a chain reaction from other Chinese companies who are ready to outsource their production chains overseas.
Kindly comment and elaborate upon the recent reports of China wanting to invest 30 per cent of the investments required in infrastructure.
Well, this is part of the policy efforts to augment the national strategy to build up a homegrown economy, in order to maintain the momentum of economic growth which is a must to produce jobs for the young people who come into labour market by the millions each year. As I mentioned earlier, infrastructure is the core industry which would provide steam for 20-odd industries via production, manufacturing and service chains. Meanwhile, as China further pursues peaceful development, it needs to reach out to the outside world, via railway and high-speed railway. One more thing, as China expedites the process of modernisation and elevation of economic structure, some traditional economic centres are faced with transformation and some new economic centres are coming into being. All the above factors have created demand for the government to add up to the annual budgetary expenditure on infrastructure.
The Three Gorges Dam has been one of the most aggressive projects and can serve India well as a benchmark in its river interlinking plans. Your comment?
The Three Gorges Dam has become the benchmark for China to be a major participant and contributor in the hydropower industry both in China and around the world. It has been generating around 10 per cent of total power supply nationwide, which is contributing to the national effort to promote green development. It has built up a buffer vis-a-vis both droughts and floods along the Yangtze River. These macroeconomic and social benefits are evident since the project went into operation. It has helped China to build up an across-the-country electricity regulating mechanism.
The mega project has been serving as an effective medium for the cities and rural communities, in and around the project, to realise rapid economic and social development, effectively benefiting from the ¨spillover effects¨. Nevertheless, anything has its two sides. The Three Gorges Dam is also contributing to some social disorder in terms of resettlement of the people in the project areas. The mega project is also contributing to some challenges in terms of local environment protection and some sustainability of some bio-species. However, the Chinese government has been striving to manage the above negative impacts, in order to realise the established goals in the above regard.