1/10
In this interesting People’s Daily piece, the authors, including a former PBoC banker, say infrastructure investment is the main way for China to “stabilize” growth this year. This is almost certainly the policy consensus.
en.people.cn/n3/2022/0228/c…
In this interesting People’s Daily piece, the authors, including a former PBoC banker, say infrastructure investment is the main way for China to “stabilize” growth this year. This is almost certainly the policy consensus.
en.people.cn/n3/2022/0228/c…
2/10
In 2022, the authors say, exports and consumption are unlikely to generate sufficient growth, as is investment in manufacturing, so that infrastructure investment must grow faster than GDP if China is to achieve GDP growth targets above 5%.
In 2022, the authors say, exports and consumption are unlikely to generate sufficient growth, as is investment in manufacturing, so that infrastructure investment must grow faster than GDP if China is to achieve GDP growth targets above 5%.
3/10
They then propose the usual reasons given to justify unlimited investment spending on infrastructure: “China’s per capita infrastructure capital stock is only 20-30 percent that of developed countries, and the urban-rural and regional development gap is still large.”
They then propose the usual reasons given to justify unlimited investment spending on infrastructure: “China’s per capita infrastructure capital stock is only 20-30 percent that of developed countries, and the urban-rural and regional development gap is still large.”
4/10
These arguments implicitly assume that businesses and workers in poorer economies are able to absorb capital stock as productively as the most advanced economies at the capital frontier regardless of different economic, social and political institutions.
These arguments implicitly assume that businesses and workers in poorer economies are able to absorb capital stock as productively as the most advanced economies at the capital frontier regardless of different economic, social and political institutions.
5/10
The main difference between a less developed economy and a highly advanced one, according to this view, is not differences in legal, financial, business, political, educational, and social institutions, but rather differences in the level of capital stock.
The main difference between a less developed economy and a highly advanced one, according to this view, is not differences in legal, financial, business, political, educational, and social institutions, but rather differences in the level of capital stock.
6/10
I disagree. It's true that very poor countries often seem to benefit from further investment in capital stock, however indiscriminate, but only up to a point. Beyond this point (which I all the “Hirschman” level in this essay), the constraint on...
carnegieendowment.org/chinafinancial…
I disagree. It's true that very poor countries often seem to benefit from further investment in capital stock, however indiscriminate, but only up to a point. Beyond this point (which I all the “Hirschman” level in this essay), the constraint on...
carnegieendowment.org/chinafinancial…
7/10
further development is not investment, but institutional reform. Infrastructure investment, in other words, should be thought of as something that accommodates the growth in the productive capacity of the economy, and not as something that causes this growth.
further development is not investment, but institutional reform. Infrastructure investment, in other words, should be thought of as something that accommodates the growth in the productive capacity of the economy, and not as something that causes this growth.
8/10
If I am right, the discussion in China should really be over what the nature of the reforms needed to boost China’s capacity to absorb more infrastructure productively, rather than over how much infrastructure spending is needed to achieve growth targets.
If I am right, the discussion in China should really be over what the nature of the reforms needed to boost China’s capacity to absorb more infrastructure productively, rather than over how much infrastructure spending is needed to achieve growth targets.
9/10
These discussions are certainly occurring, but as was always the case for countries that followed this growth model, they don’t have much effect on policymaking. In the past constituencies that benefitted politically from the existing model were always able to block debate.
These discussions are certainly occurring, but as was always the case for countries that followed this growth model, they don’t have much effect on policymaking. In the past constituencies that benefitted politically from the existing model were always able to block debate.
10/10
As an aside, according to this piece, investment in real estate, infrastructure and manufacturing account for 24%, 25% and 32% of investment, respectively, which together account for roughly 45% of GDP (compared to less than half that level for most other countries).
As an aside, according to this piece, investment in real estate, infrastructure and manufacturing account for 24%, 25% and 32% of investment, respectively, which together account for roughly 45% of GDP (compared to less than half that level for most other countries).
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