Thu, Mar 30, 2017 | updated 04:29 AM IST

China infrastructure investment model "destroyed, not generated" economic value: Report

Updated: Sep 29, 2016 16:52 IST

London [UK], Sept. 29 (ANI): According to an Oxford University report, infrastructure investment has been a major driver of Chinese economic growth over the past 35 years, but currently, more than half of Chinese infrastructure investments have been "destroyed, and are not generating " economic value, as costs have been larger than benefits.

This finding is likely to fuel a debate over the viability of China's infrastructure-heavy growth model.

China has stepped up infrastructure spending this year to buffer a slowdown in manufacturing investment. But such investment leads to significant waste while adding to China's worrying debt load, says the paper by Oxford professors, led by Atif Ansar, a lecturer at Oxford's Saïd Business School.

"Far from being an engine of economic growth, the typical infrastructure investment fails to deliver a positive risk-adjusted return," the paper found.

"Poorly managed infrastructure investments are a main explanation of surfacing economic and financial problems in China. We predict that, unless China shifts to a lower level of higher-quality infrastructure investments, the country is headed for an infrastructure-led national financial and economic crisis," the Financial Times quotes the report, as saying.

The paper takes aim at what it calls the "prevalent view" among economists that high rates of infrastructure investment are crucial to growth for developing economies and that China offers a model for others emulate, the Financial Times adds.

On the contrary, Ansar warns that countries such as Brazil, Nigeria and Pakistan should not follow China's path.

President Xi Jinping's signature foreign policy initiative, the New Silk Road, calls for the country to finance road, rail and port construction to connect China with central Asia, the Middle East and Europe.

"It is a myth that China grew thanks largely to heavy infrastructure investment. It grew due to bold economic liberalisation and institutional reforms, and this growth is now threatened by over-investment in low-grade infrastructure," said Ansar.

The research paper said that three quarters of all projects suffered a cost overrun, which has exacerbated the debt problem which appears in the current issue of Oxford Review of Economic Policy.

The authors estimate that a third of China's USD 28.2tn debt load is attributable to such overruns. The study is based on a sample of 95 road and rail infrastructure projects in China between 1984 and 2008.

Other economists however do not agree with Ansar's criticism citing that even if an infrastructure project does not directly generate enough cash flow to cover its financing costs, positive externalities can spur enough economic activity that makes the project worthwhile.

"For most of the past few decades, the bulk of Chinese infrastructure investment has served the overall economy reasonably well. If you compare China with most other developing countries, they would love to be in China's shoes in terms of having all that infrastructure," said Louis Kuijs, head of Asia economics at Oxford Economics and former senior China economist at the World Bank.

But Kuijs acknowledges that China now faces diminishing returns from additional infrastructure, as the most productive investments are already largely complete. Other analysts also see problems with excessive and wasteful infrastructure investment but doubt it will lead to crisis.

"The authors' data on individual infrastructure projects tell us that China is basically no worse and no better than the rest of the world in terms of managing infrastructure projects - just like everywhere else, they often run behind schedule and over budget," said Andrew Batson, China research director at Gavekal-Dragonomics in Beijing. (ANI)

Washington D. C [USA], Mar. 30 (ANI): U.S. President Donald Trump's elder daughter Ivanka Trump will become an official government employee, joining her husband Jared Kushner in serving as an unpaid advisor to her father in the White House.

Full Story >>

London [UK], Mar. 30 (ANI): Hours after the Britain invoked Article 50 to start the formal process of Brexit, German Chancellor Angela Merkel dealt an instant blow to British Prime Minister Theresa May's plan of holding trade talks at the same time as Article 50 secession negotiations.

Full Story >>

London [UK], Mar. 30 (ANI): Prime Minister Theresa May has been accused of threatening to use the safety of British and European citizens as a bargaining chip in Brexit talks.

Full Story >>

Dubai [UAE], Mar. 29 (ANI): The United Arab Emirates (UAE) Cabinet today approved a decision to grant Indian passport holders 'visa on arrival' provided they have a valid US visa or a green card holder.

Full Story >>

Indian Army gifts seven horses to Nepal Army

Updated: Mar 29, 2017 21:20 IST

Kathmandu [Nepal], Mar. 29 (ANI): Organising a special function, the visiting Chief of Army Staff of India, General Bipin Rawat, handed over a stallion light breed, two brood mares, two gelds and two donkey stallions to his Nepali Counterpart General Rajendra Chhetri today.

Full Story >>

Kathmandu [Nepal], Mar. 29 (ANI): Indian Army Chief General Bipin Rawat was conferred with the title of 'Honorary General of the Nepal Army' by Nepal President Bidya Devi Bhandari in a grand ceremony on Wednesday.

Full Story >>

London [UK], Mar. 29 (ANI): The UK government has kick started the Brexit process for Britain to formally leave the European Union (EU) in two years time by triggering Article 50 of the Lisbon Treaty.

Full Story >>

By Binod Prasad Adhikari

Full Story >>

Dhaka [Bangladesh], Mar. 29 (ANI): Investigators in Bangladesh have started preliminary investigation against controversial businessman Moosa Bin Shamser after they received information that he had committed crimes during the 1971 war.

Full Story >>

Dhaka [Bangladesh], Mar. 29 (ANI): India has become a net exporter of electricity from being a net importer of electricity as the country exported 5,798 million units of electricity to Bangladesh, Nepal and Myanmar this year, according to an official release.

Full Story >>

Dhaka [Bangladesh], Mar. 29 (ANI): Four members of a new faction of the banned militant outfit Jama'atul Mujahideen Bangladesh (New JMB) were detained by the Rapid Action Battalion (RAB) from Dhaka's Dohar area.

Full Story >>

New Delhi [India], Mar. 29 (ANI): Indian Prime Minister Narendra Modi has said that India will be delighted to welcome Malaysian Prime Minister Najib Razak to the country, adding that his counterpart's visit will boost relations between the two countries.

Full Story >>

By Binod Prasad Adhikari

Full Story >>

Dubai [UAE], Mar. 29 (ANI): Pakistan is pursuing a two faced policy of trying to befriend Iran and at the same time maintaining close ties with Saudi Arabia, according to informed sources and in the process is angering both Iran and Saudi Arabia.

Full Story >>

Trump attacks NYT, asks it to be more honest

Updated: Mar 29, 2017 06:46 IST

New Delhi [India], Mar. 29 (ANI): Citing a report in United States' news daily New York Post, President Donald Trump has attacked New York Times stating that the news daily's deteriorating readership could have improved had it been honest about its reports.

Full Story >>

London [UK], Mar. 29 (ANI): Thousands of people have signed a petition calling for First Lady of the United States Melania Trump to move into the White House or to foot the security bill for staying in the Trump Tower in New York.

Full Story >>

London [UK], Mar. 29 (ANI): British Prime Minister Theresa May will today trigger Article 50 that will kick-start the Brexit process for Britain to formally leave the European Union (EU) in two years' time.

Full Story >>

Beijing [China], Mar. 29 (ANI): China and the Philippines will hold the first meeting of a bilateral consultation mechanism on the South China Sea issue in May.

Full Story >>

New Delhi [India], Mar. 29 (ANI): The United States has expressed its concerns over the irregularities, ?which it said impeded a free and fair vote in the Maldives Parliament, during the no-confidence motion against speaker Abdulla Maseeh.

Full Story >>

London [UK], Mar. 29 (ANI): Takeoffs and landings have temporarily been halted at London Stansted Airport after pro-migrant activists stormed the runway in an attempt to keep a "deportation flight" of failed asylum seekers grounded at the Essex airport.

Full Story >>