Airport Business News - Asia / Pacific.

 
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New York (AirGuideBusiness - Airport Business News Asia / Pacific) May 27, 2012

Analysis: Geography, not economy, counts in China's rebalancing A gleaming new $1.4 billion airport extension, a $5.2 billion bullet train and Samsung's planned $7 billion electronics plant, touted as the largest single high-tech foreign investment in China, are sure signs of economic intent in ancient Xi'an. Along with a $1.4 billion subway, a crane-cluttered skyline and rapidly rising tower blocks shrouded in industrial smog that cloaks the 3,000-year old former dynastic capital, they show that fixed asset investment remains the main route to growth for China - trod for three decades and likely for decades to come. For all of China's talk of economic rebalancing to shield it from internal and external risks, the only real re-orientation in the medium term is geographic - shifting infrastructure spending west to replicate rewards reaped by 30 years of coastal development. That is likely to stoke concerns already voiced by the International Monetary Fund about China's unprecedented rate of investment spending and confound investor expectations that rebalancing would be a swifter shift towards the consumption-driven growth of developed economies - not 20 more years of inland infrastructure creation. "There are experiments everywhere in China. Some good points emerge and the best points are what the centre tries to identify and encourages others to learn from," Zhang Wei Wei, a leading scholar of China's development model who was translator to its architect - Deng Xiaoping - told Reuters. China's rise, in Zhang's analysis, depends on a conscious effort by Beijing to perfect an urban development model that eases rural poverty and cements power in the capital. It implies fixed asset investment on a scale as enormous as that which has generated around half of China's growth in the last decade - when it amassed a foreign reserves fortune of $3.3 trillion, became the world's second-largest economy, the biggest exporter and the most important driver of global growth. Indeed, intensive urbanization is the only way Xi'an and dozens of similar cities can grow fast enough for the Communist Party to make good on pledges to raise incomes for the poor and achieve social stability, thereby justifying its grip on power. During the 2005-2010 five-year plan, average annual urban income in Xi'an roughly doubled to 22,244 yuan ($3,530). The plan is to double it again by 2015. But that still leaves wages way behind Shanghai's 71,874 yuan average - China's highest. STRATEGIC OBJECTIVE China's 'Go West' development strategy, in its second decade after generating $325 billion in investment since its launch in 2000, is the manifest example of the China model in action and ample evidence to long-term investors of its durability. "It is a conscious strategic objective," said Gang Zou, general manager in Xi'an for Applied Materials, the world's largest chip-fabrication equipment maker and an investor so important it is mentioned by name in the municipality's latest five-year plan - the cornerstone of government policy. "The first 10 years of the 'Go West' policy helped Xi'an build the infrastructure to be ready to take more opportunities in the second 10 years," Zou told Reuters on a tour of Applied's $300 million research, development and training facility - and the world's biggest privately-owned solar cell R&D laboratory. Applied, which has operated in China for 28 years, generated $2.5 billion of its $10.5 billion global revenues in the country in 2011 - a cool $1 billion more than it billed there in 2010. No wonder Samsung is following suit with an investment in a plant to make memory chips that will total $7 billion over several years - or 11.5 percent of Xi'an city's entire 2011 GDP. Samsung, like Applied, cites clear-planned, infrastructure-led urban development as a key reason for investing in a city that boasts one of the highest research institute and university...

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