dray
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I would want to know a bit more here.
- In last one decade Chinese government led funding of infrastructure project as a means of stimulus package after global recession. we must note here that infrastructure sector and associated construction sector keeps several support industries going. For example when you build large rail roads, you are automatically help cement, steel, heavy construction equipment, electrical equipment too. Similar analogy for roads and marine industry (ports etc) can also be given. Now if you ask results, in the years (2008-2015), when whole world was struggling with recession, China was still logging strong growth and a large credit of this must go to central bank assisted massive investment in infra sector.View attachment 333977 View attachment 333976
- Several infra projects do not yield immediate results and while return on investments might be low, we need to take into account socio-economic parameters as well into account. Example, we build a railway line in far flung areas, that might not generate immediate passenger or freight revenue, but if it allows industry to spread in that remote area will bring in long term benefits of avoiding population movement and uniform distribution of employment opportunities, keeping real estate prices in check. I discussed a similar thing with @WAJsal on his CPEC tread. This i believe remain true anywhere in the world.
- Third is problem that China might face. I think the real threat lies in Chinese manufacturing overcapacity and if world remains in slow down era for another 5-6 years, there could be a real problem for export dominated Chinese economy.
- In continuation of (3) above, ex RBI chief Dr. Rajan once wrote that economies need to evolve constantly based on what their core strengths are. For example, India rode heavily on Agriculture for several decades, before benefits of good education for generation after independence brought in an opportunity for manufacturing, engineering and later IT and service sector. He further opined that economies based on using natural resources (minerals, fossil energy etc) at some point in time will find themselves in trouble. This looks more and more true with Oil exporting economies feeling the heat of low crude prices.
- To move ahead and prepare for an economic future, we cannot predict accurately, the only solid bet is development of human skills and education.
- To summarize, measures like low interest rate regime, economic stimulation, preferential investment in certain sectors do help, but only in short term. The effects of these measures tend to saturate and then unless there is a willingness and preparedness to change path, we find ourselves in a vicious cycle, like world finds itself in that of a very low growth.
Tagging experts for more on this
@Levina @Rain Man
That's a very good example to show, how persistent investment can lead to creation of business opportunities hitherto unknown.
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Today China's HST network stands at an amazing 20000 kms.
There is a huge growth in passenger revenue as well, with more people migrating from Air to HST travel.
However if somebody asked 15-20 years ago about such a massive investment in a relatively risky (economically) public transport technology, most economies would not have dared to take a plunge. But today we see obvious benefits of a consistent policy.
Those two charts are interesting, they clearly show that about half of China's growth rates in the past decade was driven by huge investment stimulus, which is likely to be unsustainable beyond a point.