Goverment-Subsidized Technology Won't Save China's Economy

With China facing its most severe economic contraction in decades, Beijing is resorting to infrastructure investment to shore up growth. Officials are claiming that this spending will have a transformative impact on the Chinese economy. But without reforms to the state sector, the transformation they are expecting will prove to be elusive.

The work report presented by Premier Li Keqiang at the May 22 session of the National People’s Congress (NPC) stated that this year’s stimulus policy would focus on three main areas—“new infrastructure,” “new urbanization,” and transportation and water conservancy. The new infrastructure push will include “next-generation information networks,” “5G applications,” “charging facilities,” and “new-energy automobiles.” New urbanization will involve the “renovation of 39,000 old urban residential communities” and “the installation of elevators in residential buildings,” among other things. The transportation and water conservancy projects consist primarily of new high-speed rail lines and massive reservoir and pipeline schemes.

None of these are novel priorities. What is significant is that they have now been elevated to the status of an integrated program for reversing the tailspin in China’s GDP. The inclusion of so many high-tech initiatives is particularly noteworthy. Where previous infrastructure stimuli consisted primarily of old-school construction projects such as the many roads and bridges to nowhere that were built in the aftermath of the 2008 global financial crisis, this time the planners will be counting heavily on new economy themes.

The hope is that IT wizardry will make it possible to avoid the wasteful side effects of China’s previous building booms. As NPC delegates told the Economic Information Daily, “New infrastructure will avoid problems encountered with traditional infrastructure including excess capacity resulting from insufficient demand and infrastructure that is out of step with industrial development.” Instead, as Zhang Zhanbin, head of the Central Party School’s Academy of Marxism, explained, the new investment will be “not only beneficial for stimulating overall economic growth but at the same time will promote the transformation and upgrading of the economic structure.”

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Gary Anderson 1 month ago Contributor's comment

Meanwhile American roads and streets look like third world trash.

Anastasija Janevska 1 month ago Member's comment

Really? How so? Because of Covid-19?

Gary Anderson 1 month ago Contributor's comment

This article is critical of Chinese central planning. Yet the United States decentralized method cannot even keep potholes under control.

Jack S. Chen 1 month ago Member's comment

I think the US has bigger problems than potholes to worry about these days.