China stepped up its infrastructure spending in the decade after the 2008 financial crisis to counter flagging global demand. That increased the country’s debt, but it has also built the foundation to transform its economy into a productivity-led growth model.

High-quality basic infrastructure helps support a healthy labour force; advanced transportation systems increase efficiency through time and cost savings and network effects; cutting-edge computing technology can greatly increase innovation capacity.

The beneficial spillovers from China’s infrastructure boom over the past decade will be realised in the coming years.

Over the past decade, China has jumped from 66th out of 152 countries to 36th place when ranked on overall infrastructure according to the World Economic Forum’s Global Competiveness Report.

Electricity availability reached full coverage for the country in 2013, putting it on par with high-income economies, and access to clean water and sanitation have improved continuously.

Meanwhile the growth in transportation facilities has been exponential, especially in air and railways. The number of Chinese cities with metro services has risen from 10 to 34 since 2008 with their networks’ route coverage increasing more than five-fold to 4,657km over the past decade.

China has also added 1.1m km of highways over the past decade, taking its total road network to 4.8m km. The rail system has increased by 52,000 km to 132,000km. Another 5.9m km of air routes takes China’s total air-route network to 8.4m km and its air passenger volume is now the second largest in the world.

The investment in infrastructure is also evident in China’s high-speed rail system. The network began in 2008, in time for the Beijing Olympics, but is now the world’s largest, accounting for two-thirds of the global high-speed rail network.

China’s information and computer technology development has likewise been rapid. Mobile-phone subscriptions now exceed 1 per person on average and broadband access is above that of upper-middle-income economies.

China was one of the first countries to develop and test commercial 5G networks. In October 2019, three of China’s largest mobile-phone carriers launched 5G services, making it the world’s largest 5G mobile network.

Infrastructure investment requires large upfront investment, but provides productivity gains in the long run. Time and cost savings for commuters, improved market access, healthier competition, increased exchange of ideas and enlarged innovation capacity are a springboard for economic development.

High-speed rail cuts journey times but also connects dense urban areas with less crowded cities, allowing for a more balanced distribution of labour and business development without sacrificing the benefits of an increasingly urbanised economy. Operational costs are low compared with the high fixed construction costs and economies of scale mean that productivity rises as rail usage increases.

Developments in advanced infrastructure, such as 5G, provide the backbone for next-generation technologies and encourage innovation and entrepreneurship. For example, China’s high level of mobile-device usage allowed for the growth of cashless payment systems. The high level of internet access also meant that e-commerce could flourish, and it now accounts for a quarter of all retail sales.

Complementing its rapid infrastructure development is China’s upgrading labour force. A strong education system with a focus on science, technology, engineering and maths means its human capital is set to increase, in spite of a shrinking labour force. This combination of a strong infrastructure foundation and high-quality human capital will allow the country to transition into an innovation and productivity-led growth model, supporting its economic development in future years.

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