China’s massive infrastructure boost to tackle coronavirus crisis

The government of China plans a series of new infrastructure projects to boost the economy after the depression caused by the coronavirus outburst.

Despite current conditions, regarding the coronavirus spread, in Europe and the U.S. are deteriorating, it seems that the situation in China is gradually improving.

Currently, numerous Chinese provinces, including Beijing and Shanghai, have announced their plans for the development of major infrastructure projects. The total investment is expected to reach the impressive amount of $4.8 trillion. “How to offset the epidemic’s negative impact on the economy? The simplest and most effective way is to develop infrastructure,” Ren Zeping, chief economist of Evergrande Research Institute, stated.

Everyday life in China is slowly re-established as people have started returning to their works and businesses are opening. Construction works have also restarted in 500 waterway and roadway projects which were paused after the virus outbreak.

According to Sina Finance, a Chinese technology and business company, the construction industry recorded a 21,1% growth as of March 3, after reaching a low point one month earlier. 

The total investment will include "traditional" infrastructure projects as well as smart technologies including the Internet of Things and Artificial Intelligence applications.

The economic boost also aims in addressing the financial damage caused by the U.S. and China trade war.

Nevertheless, according to Bloomberg, China’s attempt may prove to be inadequate in terms of financial growth. Investing in infrastructure leads to a modest increase of the national nominal Gross Domestic Product (GDP). Instead, China is a country that should be benefited from industrial production.

It is not the first time that China focuses on developing infrastructure during a financial crisis. In the 1997–98 Asian crisis, which started after the financial collapse of the Thailand currency (Baht), China dedicated large funds for construction projects. During the 2008 global economic crisis, which, according to many experts, has been the most severe financial crisis since the Great Depression in the 1930s, the Chinese government invested again in infrastructure to support the economy despite being heavily criticized. “Over the past 40 years, how could ‘Made in China’ have achieved such a strong competitiveness without its infrastructure projects being built in advance?” Mr. Zeping, added.

Sources: Asiatimes, Bloomberg