Everything Is Shovel-Ready In China

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 |  Includes: FXI
by: Tom Evslin

Construction in China happens very quickly; but people with shovels have hardly disappeared. This crew rebuilt a section of road near the Beijing Zoo in a few hours. Possibly it was more efficient to use them than to bring in heavy equipment for a very small job; possibly the government is reserving some work for unskilled labor – I had no way to tell. Even in Beijing food is very cheap and workers can live on a low end salary of about $10/day.

On the other hand, when China decides to have a stimulus program, they can build big and fast. At $750 billion their stimulus program of 2008, which was passed to counter a slow-down in demand from customer nations, was about the same size as ours. The difference is that they actually managed to build infrastructure with the money. The already-planned high speed rail network was accelerated. The line between Shanghai and Hangzhou opened in October of 2010 and the 819 mile Beijing-Shanghai line started service at 236 mph in June of this year just slightly more than three years after construction began!

These trains run on a specialized elevated roadway built out of concrete with almost no curves and very little grade. It goes through hills which can't be moved out of the way. Huge equipment as well as massed manual labor was used in the railroad expansion project. Acquiring right-of-way is apparently not difficult when the government owns all the land to begin with; environmental permits weren't a problem.

But all is not well with the high speed project to build high speed rail. On July 23, 2011, a train which had been disabled by a lightning strike was hit from behind by another train – something the signaling system was meant to prevent. The government says that 40 people died; some Chinese we talked to said the actual death toll was much higher (they get their information from the Internet, natch). There has not yet been an official announcement of what went wrong.

Whatever the truth is about cause and fatalities, the government abruptly shut down the entire railroad construction project countrywide by denying the responsible ministry the authority to issue further debt. According to China Daily, $40 billion was just released, but that may be just enough to pay contractors and laborers for work that was done prior to the defunding – all payments stopped after the accident. We saw partially done rail projects in several parts of China and no evidence of ongoing work.

When we took the train from Beijing to Shanghai it had been slowed down to 186 mph for "economy and safety reasons"; so the 819 mile trip took 4 hours and 45 minutes with one stop. Obviously this is still very competitive, downtown to downtown, with flying the route – the distance is a little less than the highway miles from New York City to Chicago; imagine a train that did that in under five hours. Eighteen car trains run several times an hour during the day although some have more stops. This is infrastructure that makes a difference, although I have no way to judge the cost/benefit.

We don't have to adopt China's political system in order to make major infrastructure projects feasible again in the US. But, unless we reform our permitting system and curb the power of NIMBY to cause endless delay, we won't be able to compete with China's economic system.