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13 June 2011

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Glen Suarez

John

The debate about Chinese over-investment (or not)is more I think about the quality of its investment, isn't it? If investment does not have an effect on the marginal cost of businesses then it is probably valueless in the long term. I am thinking of investment in bridges to nowhere or oil refineries and shipping terminals that you see in parts of southern Italy which no body uses because it did not meet quality standards etc. On the other hand, transport connecting large population centres can be very valuable in reducing the marginal cost of supplying one centre from the other.

I am not sure how much work has been done on this in the context of China. Certainly the (little) I have seen suggests that you are right in arguing that Chinese infrastructure spending has been very valuable indeed.

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John Ross

  • Is Senior Fellow at Chongyang Institute for Financial Studies, Renmin University of China

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