On 6th July, the New York Times published an article on vast debts allegedly being shrouded by the Chinese Government following several years of intense construction projects, largely concentrated in the infrastructure sector. The lengthy feature detailed the many loopholes and escape routes utilised by the powers-that-be, enabling them to sidestep financial legislation and continue the building splurges.
It is no secret that China has become the new Middle East; Shanghai and Beijing stepping into the void left by Dubai and Abu Dhabi in terms of extravagant architecture. Dozens of super-tall buildings are springing up within Tier One and Tier Two cities, amongst hundreds of ambitious commercial towers, leafy mixed-use projects and rejuvenating waterfront schemes.
Linking all of these new developments is a series of infrastructure projects that are thought to be costing the Chinese Government hundreds of billions of dollars (the redevelopment of the city of Wuhan alone is thought to reach $120bn). But where does this money come from?
The New York Times posed that financing for large-scale infrastructure projects has been sourced from state-run banks, with specialist investment companies set up by each city borrowing the money to prevent any debt reaching official balance sheets.
However, a report by the Urban Land Institute and professional services firm Ernst & Young entitled ‘Infrastructure 2011: A Strategic Priority’ suggests that China’s monetary position is stable enough, stating: “Flush with cash from its role as an export-driven manufacturing powerhouse, China is moving ahead with wide-ranging infrastructure programs…Newly constructed airports, ports, and subway systems in China’s major centers facilitate the country’s growth into the world’s second-largest economy and help it deal with mounting congestion from burgeoning urban populations.”
Now questions have begun to circulate on the internet, ignited by the Times’ feature and fueled by the lack of available information on China’s seemingly limitless funds. Infrastructure projects in the country currently centre on a Five-Year Plan (launched in 2011) which allocates $1trillion to building new infrastructure links over the next five years, with large volumes of money concentrated on a high-speed rail network and smaller amounts on water supply, electricity and road maintenance.
Many have begun to question the longevity of China’s architectural growth, as the country shows no sign of stopping or indeed slowing its urban development. Rural areas have also been positively affected despite vast quantities of rural dwellers relocating to the major cities, as last July the Chinese Government pledged $100bn to rural infrastructure projects.
Over the last few months WAN has posted scores of new development projects across China, from lakeside masterplans in Suzhou and cultural centres in Shanghai, to eco-housing in Nanjing and skyscraping towers in Wuhan.
Admittedly a portion of these will be funded by private investors, yet a large number have been backed by state-run organisations such as Goettsch Partners’ Pazhou District Masterplan which is being run by Poly Real Estate (Group) Co. Ltd., China’s leading state-owned real estate company, and extravagant plans to merge nine Tier Two cities into a single megacity, linked by an efficient system of water, energy, telecommunications and transport links.
A quick look at our Tender Alerts Service also suggests that a reduction in production is not forthcoming, with tenders issued for an Industrial Park Masterplan in Guigang, a Multimedia Masterplan in Shanghai, a Development Zone in Huangshan and an Urban Colour and Height Masterplan in Shaoxing, amongst others.
When one considers the sheer population of China - currently 1.3bn and increasing at a rate of 5.84% per decade (National Bureau of Statistics) - the Government’s decision to concentrate on meeting the growing demand for basic services appears to be an acceptable approach. The problem comes when the construction process is complete and the projects remain uninhabited, as has occurred in several locations across China such as Kangbashi (a 1,000,000-capacity city in Inner Mongolia constructed by Ordos officials and thought to house between 20,000 and 30,000 people) and Zhengzhou New District (which is reported to possess 64million vacant residences).
Over the next 25 years, global expenditure on infrastructure will reach $50trillion (Infrastructure 2011: A Strategic Priority) and whilst China’s contribution to this is certainly heavy, as the world’s second largest economy it must think forward and counterbalance its extreme growth with adequate architectural developments.