Headline : Translation: The Problems of Inefficient Infrastructure Spending Are Beginning to Surface

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After a decades-long infrastructure spending spree, many of China’s local governments now find themselves saddled with unsustainable levels of debt and a surplus of vastly ambitious but often underutilized infrastructure projects. The International Monetary Fund and Wall Street banks estimate China’s total outstanding off-balance-sheet government debt to hover between $7 trillion to $11 trillion U.S. dollars, which includes bonds issued by thousands of local-government financing vehicles (LGFVs) to finance roads, bridges, and other forms of infrastructure. 

The local government debt problem is a concern for investors and governments alike. In November of last year, China’s central bank announced that it would provide emergency liquidity support to regions heavily burdened by debt, but there is a limit to even the central government’s largesse. The following month, Moody’s issued a downgrade warning on China’s sovereign credit rating, citing concerns that centralized bailouts of local governments and state-owned enterprises, coupled with an ongoing property crisis, would weigh down the Chinese economy. Moody’s also placed the ratings of 26 Chinese LGFVs on review for a downgrade, and dropped the ratings outlook of another 22 LGFVs to “negative.” In January of this year, China’s State Council—concerned about managing approximately $13 trillion U.S. dollars in municipal debt—instructed 12 heavily indebted local governments to delay or halt some state-funded infrastructure projects.

The following full translation of an article from WeChat finance account 关胖本胖 (guān pàng běn pàng) describes some of the more egregious examples of inefficient and excessive infrastructure spending—for example, hugely expensive high-speed rail stations that are located in the middle of nowhere, or that serve very few passengers, or that were never put into operation at all. The author also dissects the systemic political weaknesses that gave rise to such undisciplined infrastructure spending, and lays most of the blame on the Chinese Party-state’s “top-down” system predicated on absolute obedience to authority:

*Editor’s note: The text has been edited to clarify that the 5,544 stations referred to include all railway stations, not only high-speed railway stations.

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