When Shanghai announced that it intended to upgrade water systems for households in suburban areas, the initiative caused an uproar among local residents keen to see improvements in quality of life.
Through this pilot scheme, about 10,000 households in suburban cities may eventually be able to get safe water straight from the tap in the coming years. It is meant to be a prelude to wider development across the city of 25 million that local authorities say should be finished by 2035.
But to achieve this goal, several billion yuan will be needed to upgrade existing pipelines, water purification equipment, and waste disposal facilities.
However, at a time of mounting local-level debt across China – due in part to unchecked spending on infrastructure projects meant to stimulate local economies – even efforts to bring safe water to people raise questions about who Who should bear the investment costs, and who should bear the investment costs? How to pass additional utility expenses on to households.
What GDP target should China set for 2024 to double its economy by 2035?
What GDP target should China set for 2024 to double its economy by 2035?
The fact that households under wealthier city jurisdiction in mainland China lack access to safe tap water — a decades-old requirement not only in international cities like London and New York, but also in small towns in developed countries — has complicated the debate over what If the second largest economy in the world suffers from excessive investment.
“The economy does not need the government to invest more in large infrastructure or useless projects to move forward,” said Chen Xiu, professor and chair of finance at the University of Hong Kong.
The speed and scale of China’s infrastructure development means it has essentially crammed 50 to 60 years of normal construction and investment in developed countries into about 30 years, the economist explained.
“This model needs to be rethought,” Chen warned.
The construction of China’s monolithic infrastructure has seen the leveling of mountains, the filling of canyons, and the creation of new cities in numerous mega projects. Much of this was the result of Beijing using a 4 trillion yuan (US$562 billion) stimulus package in 2008 to counter the shocks of the global financial crisis.
But the spending and construction campaign has plunged many local governments into large and sometimes crippling debt, and it is not uncommon to see underutilized roads, empty airports, and unoccupied housing complexes, especially in western China.
Many institutions, including the International Monetary Fund, have called on China to shift to a consumption-led economic growth model to achieve sustainability while strengthening its social safety net and welfare to help boost consumption, as many Chinese report uncertainty about their needs. Income in the post-Covid era.
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“It will be important to change the sources of growth to rebalance from over-reliance on investment towards more consumption,” Thomas Helbling, deputy director of the IMF’s Asia and Pacific Department, said in early November.
However, some advisers argue that investment remains the best pillar of support for the economy in the short term when exports continue to falter and residents are reluctant to ease financial constraints.
“There is a lot of room for expansionary fiscal policies, and time is needed to adopt these policies,” Yu said at a recent forum in Shanghai, warning that China’s low inflation rate would discourage investments.
Investments accounted for 1.6 percentage points of GDP growth in the first three quarters of the year, compared to 4.4 percentage points for consumption. Net exports slowed growth by 0.7 percentage points.
Meanwhile, Beijing is being pressured and urged to foot the bill when it comes to livelihood-boosting infrastructure, as private investors are unlikely to pump money into such products when local governments’ finances are in tatters.
Zhu Tian, a professor at the China-Europe International Business School, said large investments remain a major catalyst for economic growth.
“More government-led investments should focus on livelihoods and leave others behind [investments] He said that the market – especially the private sector – decides.
China’s total fixed asset investment grew 2.9 percent year on year in the first 10 months to 41.94 trillion yuan, but private investment fell 0.5 percent in the same period.
As China looks to support the economy, geopolitics and US interest rate cuts are weighing on the outlook
As China looks to support the economy, geopolitics and US interest rate cuts are weighing on the outlook
Beijing has been prioritizing water conservation projects, new data centers, and three major initiatives – urban village redevelopment, affordable housing, and emergency facilities.
Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis, said China should press ahead with welfare-boosting projects, including modernizing water supply systems and more hospitals.
“China only seems to spend money when there are clear and immediate gains in productivity or GDP, but not so much for people’s well-being,” she said.
Although such investments are unlikely to provide a significant boost to economic activities, they will remain in line with Beijing’s philosophy of “high-quality development” in its modernization drive.
“Somehow [policymakers] Feel [welfare] It does not contribute to growth. “But that is not true, because if people feel more protected, they will consume more,” Garcia Herrero said, adding that spending decisions should be made with the public’s well-being in mind.