China Urged to Curb Overinvestment in Inefficient Infrastructure

A Beijing-based think tank, Anbound, has called for a curb on China's overinvestment in large, inefficient infrastructure projects. As reported by the South China Morning Post, the think tank argues that outdated practices, rather than true economic need, are the root cause of this issue.

At a recent discussion session in Hangzhou, Anbound founder Chen Gong emphasized the urgent need for local governments to adopt a more strategic approach to infrastructure spending.

"One of the gravest challenges China’s future faces is how to compress inefficient and already excessive investments," Gong stated. He emphasized that the outdated methods used for development, characterized by low investment efficiency and rising local government debt, are no longer sustainable.

Gong's comments come as China grapples with slowing economic growth and seeks alternative drivers for sustained economic expansion. Infrastructure investment remains a popular tool for stimulating economic activity, but many projects have been poorly planned and wasteful, failing to yield anticipated returns.

"Many localities adopt a one-size-fits-all approach, but in the end, it becomes clear that solutions must be tailored to local conditions," noted Zhao Zhijiang, an Anbound researcher.

Local governments in China are saddled with significant debt, and many projects remain unfinished, including abandoned residential buildings and railway stations. These stranded assets threaten the ability of local governments to fulfill essential obligations such as paying teachers and public servants, as well as maintaining vital services like transportation.

The Anbound think tank recommends a more targeted and strategic approach to infrastructure investment, focusing on projects that genuinely serve local needs and have a demonstrable potential for economic returns. This shift requires a move away from the past practice of relying on large-scale construction projects to drive short-term growth, a practice that has often resulted in stranded assets and mounting debt.

Anbound's call for a more measured approach to infrastructure investment echoes concerns about China's mounting local government debt and the potential for financial instability if overspending continues unchecked. The think tank argues that a more strategic and needs-based approach to infrastructure development is crucial for China to achieve sustainable economic growth.