1/10
The NDRC wants to "stimulate the vitality of private investment" in key infrastructure projects such as the construction of railways, highways, ports and terminals. This strikes me as a little impractical.
sc.mp/dma1?utm_sourc… via @SCMPNews
The NDRC wants to "stimulate the vitality of private investment" in key infrastructure projects such as the construction of railways, highways, ports and terminals. This strikes me as a little impractical.
sc.mp/dma1?utm_sourc… via @SCMPNews
2/10
I think this is being done partly in the hope that private participation will improve the quality of the investment decision-making process and partly to redress the growing imbalance between public- and private-sector investment in fixed assets.
I think this is being done partly in the hope that private participation will improve the quality of the investment decision-making process and partly to redress the growing imbalance between public- and private-sector investment in fixed assets.
3/10
SCMP notes for example that "in the first three quarters of the year, the gap in fixed-asset investment growth continued to widen between the private and public sectors, with private investment expanding by 2%, far behind the 10.6% increase by state-controlled firms."
SCMP notes for example that "in the first three quarters of the year, the gap in fixed-asset investment growth continued to widen between the private and public sectors, with private investment expanding by 2%, far behind the 10.6% increase by state-controlled firms."
4/10
This new NDRC proposal seems to be formal recognition that public-sector investment in infrastructure has not been a great success for the economy, but unfortunately it suggests that the reason has to do not with over-investment but rather with poor judgement.
This new NDRC proposal seems to be formal recognition that public-sector investment in infrastructure has not been a great success for the economy, but unfortunately it suggests that the reason has to do not with over-investment but rather with poor judgement.
5/10
That strikes me as optimistic. China has invested nearly twice the share of its GDP as the rest of the world, and nearly 50% more than even high-investing, rapidly-growing, developing countries. Two-thirds of that has gone into property and infrastructure.
That strikes me as optimistic. China has invested nearly twice the share of its GDP as the rest of the world, and nearly 50% more than even high-investing, rapidly-growing, developing countries. Two-thirds of that has gone into property and infrastructure.
6/10
More importantly, for the first 10-15 years the consequence was a faster rise in GDP than in the debt funding investment. In the second 10-15 years, however, this debt rose much faster than the country's GDP. Growth couldn't keep pace with the debt funding the investment.
More importantly, for the first 10-15 years the consequence was a faster rise in GDP than in the debt funding investment. In the second 10-15 years, however, this debt rose much faster than the country's GDP. Growth couldn't keep pace with the debt funding the investment.
7/10
This suggests that much of that investment wasn't economically justified. That is why, I have argued, that in recent years the state sector share of GDP had to rise. The private sector simply wasn't able to participate in that kind of growth.
ft.com/content/907740…
This suggests that much of that investment wasn't economically justified. That is why, I have argued, that in recent years the state sector share of GDP had to rise. The private sector simply wasn't able to participate in that kind of growth.
ft.com/content/907740…
8/10
The point is that in recent year much infrastructure investment was designed very specifically to meet GDP growth targets that exceeded the productive capacity of the economy.
The point is that in recent year much infrastructure investment was designed very specifically to meet GDP growth targets that exceeded the productive capacity of the economy.
9/10
This kind of activity, as János Kornai explained, will always necessarily be limited to entities who are able to operate outside of hard-budget constraints, i.e. the state sector. The private sector, who cannot, will not be able to afford to participate.
This kind of activity, as János Kornai explained, will always necessarily be limited to entities who are able to operate outside of hard-budget constraints, i.e. the state sector. The private sector, who cannot, will not be able to afford to participate.
10/10
Inviting them to participate more formally isn't going to change the underlying problem. At best it means that the private sector will cannibalize overall infrastructure to participate in the most profitable sectors, and leave the rest to the state sector.
Inviting them to participate more formally isn't going to change the underlying problem. At best it means that the private sector will cannibalize overall infrastructure to participate in the most profitable sectors, and leave the rest to the state sector.
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