Page 214 - 2019 White Paper on the Business Environment in China
P. 214
9 White Paper on the Business Environment in China
on domestic consumption-led growth. That being said, a slow lane in 2018. The nation’s fixed-asset investment
exports continue to be a critical component to the in infrastructure was expected to grow at only 12 percent
country’s economic growth. According to Cushman & that year, down from almost 20 percent in the first 10
Wakefield, real estate and construction are intrinsically months of 2017. The construction cooldown took shape
linked to a host of industries in both China and the as the authorities renewed a pledge to focus on debt
US that are affected by the current trade frictions. The management following the Communist Party Congress
property market in China may see a wide variety of in October 2017. In a rare move, China suspended
impacts going forward, both minor and significant. The subway projects in some cities and toughened up on
degree hinges on how the leaders in both countries public-private partnerships—until now a widespread
progress in their deliberations. China’s property market way to fund projects. The Ministry of Finance also banned
will likely be resilient unless a full-blown trade war local governments from guaranteeing returns for private
breaks out between the two countries (Cushman & investors in projects or backing a project’s debt. The
Wakefield, U.S. - China Trade Tensions). national watchdog for state-owned enterprises also
published rules to regulate state companies’participation
China’s top tier property markets’ exposure to a – a potential blow to a major source of funding. Morgan
potential slowdown in trade with the US has lessened Stanley Asia in Hong Kong forecasted infrastructure
to a large degree since China emerged from the Global investment growth to slow to 12 percent in 2019. While
Financial Crisis. The primary reason is the government’s slower infrastructure growth may weigh on the overall
massive 4 trillion RMB economic stimulus implemented expansion, it may also aid the nation’s transformation
from 2009 to 2010 sparked rapid office absorption by towards a more balanced growth model. The building
domestic firms. Any trade related slowdowns could boom, while promoting connectivity and urbanization,
potentially impact the retail construction market in has also bloated the nation’s debt. Even at its slower
certain cities. Increased job losses in these areas would growth pace, infrastructure remains an important
result in less consumption. The impact would be more contributor to China’s output and the government
likely to affect China’s manufacturing hubs and cities on can always ramp up spending again should it need to
the coast whose economies tend to depend on exports. maintain economic growth. Infrastructure investment
grew much faster than other investments in the past
Infrastructure Construction five years. Policymakers might be able to accept slower
growth for infrastructure spending from next year as the
Over the past five years, the country has invested growth in the past decade is unsustainable (Bloomberg).
more than US$100 billion in transport, leading to the
construction of 69 highway projects, and 3,500-plus Still, China is completing several megaprojects that
miles of road (Wadlow). China spent 2.12 trillion yuan will transform its cities. Over the next decade, China
(US$323 billion) in the first 11 months of 2017, slightly plans to encourage 250 million people (29 times New
off pace to meet an investment target of 2.6 trillion York City’s population) to move into the country’s
yuan set at the beginning of the year. China was set growing megacities. To cope with that huge migration,
to invest a similar amount in 2018 on transportation the country has invested tens of billions of dollars in
infrastructure as it did in 2017. The planned investments giant infrastructure projects. For example, China opened
for 2018 included renovation of 216,000 km of roads and its most ambitious megaproject yet in 2018, a bridge
increasing volumes at China’s container ports by more that connects Hong Kong, Macau, and the mainland’s
than 15 percent, according to the Ministry of Transport. southern city of Zhuhai. Stretching 34 miles, it’s the
The transport ministry also said it would look to speed up world’s longest cross-sea bridge (Garfield). Touted as an
the construction of logistics hubs and inland waterways, engineering wonder, the project includes a snaking road
build more roads to reach rural areas, and look to push crossing, an underwater tunnel, and enough steel to
ahead of schedule projects such as the integration of build 60 Eiffel Towers. The total price tag for the project,
Beijing, Hebei and Tianjin by improving road and rail which includes artificial islands, linked roads and new
links. Infrastructure investment is expected to be among border-crossing facilities, is unclear but some estimates
the biggest drivers of China’s economic growth in coming run to over US$15.1 billion (A Bridge so Far).
years (Reuters, China 2018 Transport).
Another example of transportation progress in the
Greater Bay Area (GBA) is the long-awaited Guangzhou-
China’s frenzied construction of roads, bridges and Shenzhen-Hong Kong Express Rail Link that opened in
subway systems, however, hit if not a roadblock at least
214
on domestic consumption-led growth. That being said, a slow lane in 2018. The nation’s fixed-asset investment
exports continue to be a critical component to the in infrastructure was expected to grow at only 12 percent
country’s economic growth. According to Cushman & that year, down from almost 20 percent in the first 10
Wakefield, real estate and construction are intrinsically months of 2017. The construction cooldown took shape
linked to a host of industries in both China and the as the authorities renewed a pledge to focus on debt
US that are affected by the current trade frictions. The management following the Communist Party Congress
property market in China may see a wide variety of in October 2017. In a rare move, China suspended
impacts going forward, both minor and significant. The subway projects in some cities and toughened up on
degree hinges on how the leaders in both countries public-private partnerships—until now a widespread
progress in their deliberations. China’s property market way to fund projects. The Ministry of Finance also banned
will likely be resilient unless a full-blown trade war local governments from guaranteeing returns for private
breaks out between the two countries (Cushman & investors in projects or backing a project’s debt. The
Wakefield, U.S. - China Trade Tensions). national watchdog for state-owned enterprises also
published rules to regulate state companies’participation
China’s top tier property markets’ exposure to a – a potential blow to a major source of funding. Morgan
potential slowdown in trade with the US has lessened Stanley Asia in Hong Kong forecasted infrastructure
to a large degree since China emerged from the Global investment growth to slow to 12 percent in 2019. While
Financial Crisis. The primary reason is the government’s slower infrastructure growth may weigh on the overall
massive 4 trillion RMB economic stimulus implemented expansion, it may also aid the nation’s transformation
from 2009 to 2010 sparked rapid office absorption by towards a more balanced growth model. The building
domestic firms. Any trade related slowdowns could boom, while promoting connectivity and urbanization,
potentially impact the retail construction market in has also bloated the nation’s debt. Even at its slower
certain cities. Increased job losses in these areas would growth pace, infrastructure remains an important
result in less consumption. The impact would be more contributor to China’s output and the government
likely to affect China’s manufacturing hubs and cities on can always ramp up spending again should it need to
the coast whose economies tend to depend on exports. maintain economic growth. Infrastructure investment
grew much faster than other investments in the past
Infrastructure Construction five years. Policymakers might be able to accept slower
growth for infrastructure spending from next year as the
Over the past five years, the country has invested growth in the past decade is unsustainable (Bloomberg).
more than US$100 billion in transport, leading to the
construction of 69 highway projects, and 3,500-plus Still, China is completing several megaprojects that
miles of road (Wadlow). China spent 2.12 trillion yuan will transform its cities. Over the next decade, China
(US$323 billion) in the first 11 months of 2017, slightly plans to encourage 250 million people (29 times New
off pace to meet an investment target of 2.6 trillion York City’s population) to move into the country’s
yuan set at the beginning of the year. China was set growing megacities. To cope with that huge migration,
to invest a similar amount in 2018 on transportation the country has invested tens of billions of dollars in
infrastructure as it did in 2017. The planned investments giant infrastructure projects. For example, China opened
for 2018 included renovation of 216,000 km of roads and its most ambitious megaproject yet in 2018, a bridge
increasing volumes at China’s container ports by more that connects Hong Kong, Macau, and the mainland’s
than 15 percent, according to the Ministry of Transport. southern city of Zhuhai. Stretching 34 miles, it’s the
The transport ministry also said it would look to speed up world’s longest cross-sea bridge (Garfield). Touted as an
the construction of logistics hubs and inland waterways, engineering wonder, the project includes a snaking road
build more roads to reach rural areas, and look to push crossing, an underwater tunnel, and enough steel to
ahead of schedule projects such as the integration of build 60 Eiffel Towers. The total price tag for the project,
Beijing, Hebei and Tianjin by improving road and rail which includes artificial islands, linked roads and new
links. Infrastructure investment is expected to be among border-crossing facilities, is unclear but some estimates
the biggest drivers of China’s economic growth in coming run to over US$15.1 billion (A Bridge so Far).
years (Reuters, China 2018 Transport).
Another example of transportation progress in the
Greater Bay Area (GBA) is the long-awaited Guangzhou-
China’s frenzied construction of roads, bridges and Shenzhen-Hong Kong Express Rail Link that opened in
subway systems, however, hit if not a roadblock at least
214
