Tag Archives: infrastructure

China’s Rural Areas Show Potential To Drive Future Economic Growth

“Seeds Of Change” Starting To Appear In Formerly Destitute Areas, Motivating Entrepreneurs To Develop Remote Countryside

China's rural areas remain far behind the wealthy east coast in terms of economic development. If entrepreneurs have their way, this will change over the next few decades

China's rural areas remain far behind the wealthy east coast in terms of economic development. If entrepreneurs have their way, this will change over the next few decades

For years, China’s hinterlands have benefitted little from the huge economic growth that has transformed the country’s prosperous east coast, remaining underdeveloped and relying mainly on agriculture mainly as a result of their remoteness and often harsh terrain. If an article in today’s Financial Times is accurate, though, the next few years may be seen as a turning point for the mainly rural provinces in China’s interior. As much of China’s future growth will (or should) depend on domestic consumption and investment rather than foreign exports, the country’s interior — with its plentiful and comparatively cheap land and labor and delayed development (making it something of a “blank slate” for business) — should, if development is done correctly, make it one of China’s main engines of economic activity for decades to come. While this is obviously easier said than done, a number of motivated Chinese entrepreneurs have set out to do everything possible to make rural China prosperous, and — given the right mix of time and incentive — they might just be successful.

From James Kynge in today’s FT:

Reforms in rural finance, the monetisation of agricultural land and social welfare appear poised to turn China’s countryside from an indigent backwater to a driver of national economic growth over the next five to 10 years…Goldman Sachs has invested successfully in a leading sausage-maker. Wahaha Group, China’s biggest beverage company, owes its buoyant earnings performance largely to the rural market, where it commands a 60 per cent share. Rural China has also been a main force this year behind the surging sales of cars with a capacity of under 1.6-litres.

The fact that China’s second- and third-tier cities are the country’s major hope for sustainable business is well established. But what about the country’s fifth- and sixth-tier cities? With the sweeping changes already brought about by land privatization (perhaps downplayed by Chinese media, but a revolution in itself) and rapid commercialization of rural areas like Hubei, Zhejiang, Jiangsu, Shandong, Henan and Shanxi (as designated by the FT), still relatively impoverished and underdeveloped areas, the next 10 to 20 years could prove a windfall as companies invest in large-scale infrastructure projects (wind & hydro power plants), rail, housing, farms and heavy industry. The effect on common people’s lives could (hopefully) be dramatic.

Much like America’s continued economic strength was built largely on the development of its interior, China’s best option for growth based less on exports will be to lift its central and western provinces out of the centuries-old poverty that remains a plague in many areas.

Chinese Investment Climbs 30.5% on Stimulus Plan, Surging Loans – Bloomberg

China’s 4 Trillion Yuan Stimulus Takes Hold, Picking Up Slack For Lower Export Figures

China Trade

Slowing Exports, but growing domestic growth, may help China's recovery come sooner rather than later

Results coming out of China this week show that the government’s massive 4 trillion RMB ($586 billion) stimulus package — which is designed to boost domestic consumption, inland infrastructure construction, and earthquake reconstruction projects — coupled with a recent 30.5% boost in urban fixed-asset investment in the first four months of this year are helping the world’s third-largest economy get back on a solid growth track earlier than many other major world economies.

This is good news for China as well as the global economy, which pins much of the hopes of a relatively quick recovery on China’s domestic consumption. As Chinese consumers start to head back to shops, and manufacturers start to work their way up to higher capacity, demand for all kinds of products, both imported and domestically-produced, will help America, the EU, and Japan breathe slightly more easily. Bloomberg’s article today on China’s recovery progress gives encouraging signs that the country’s efforts to stem the financial crisis by investing huge amounts into infrastructure projects that should pay off in the long term should have a far-reaching ripple effect:

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Time To Invest In China? — CityWire UK

Additional Fiscal Stimuli Pave The Way To Recovery

Massive stimulus spending on industry and infrastructure projects are expected to transform the Chinese economy in coming years

Massive stimulus spending on industry and infrastructure projects are expected to transform the Chinese economy in coming years

CityWire reports today on China’s decision to allocate an initial four trillion RMB (£1.3 trillion) to spend on infrastructure products and consumer spending initiatives in coming years, looking to jumpstart its economy, which has lagged somewhat in recent months due to reduced demand for its exports in North America, Japan, and Europe. The author suggests that it is a good time to invest in several industries, as the potential for massive growth in certain sectors should pay off as these investments mature and China makes more progress in its transition from a state-dominated and export-led developing nation to a more consumer-led economy.

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