Chinese cities outstripping whole countries in infrastructure debt

February 27, 2014 Leave a comment

Chinese cities outstripping whole countries in infrastructure debt

Staff Reporter

2014-02-22

Spending by the city of Wuhan on infrastructure construction alone is equivalent to the UK’s expenses for updating and enhancing the infrastructure of the entire country, according to British media. The city is part of a countrywide, multi-trillion dollar infrastructure upgrade.

Wuhan mayor Tang Liangzhi said in an interview with BBC correspondent Robert Preston that Wuhan plans to spend 2 trillion yuan (US$329 billion) during the next five years on urban construction.

In 2013, Wuhan invested 130.11 billion yuan (US$21.4 billion) in infrastructure, including transportation, communications, warehousing and postal services. It further spent 190.56 billion yuan (US$31.2 billion) on real estate development, which boosts its urban construction costs to 320.67 billion yuan (US$50.6 billion) in total.

The investment of the city in urban construction is projected to reach 150 billion yuan (US$24.6 billion) in 2014 and investment in the real estate market is expected to surpass 200 billion yuan (US$32.8 billion).

The UK’s infrastructure budget till the year 2030 is estimated to be ￡375 billion (US$626 billion), covering areas in energy, communications, waste disposal, water resources and telecommunications. This would put average spending over 5 years at ￡120 billion (US$200 billion).

The rapid construction in Wuhan has also raised concerns as the city becomes a beacon in a sea of cities vying for a place at the top of the debt mountain.

As of June 30, 2012, Wuhan reported an outstanding debt of 203.71 billion yuan (US$33.4 billion). In addition, earlier this year, China Credit Rating downgraded the credit rating of Wuhan’s urban construction firm from AA to AA-.

While Wuhan is carrying out widespread construction, other Chinese cities are following suit. Many major first-tier cities are investing at least 100 billion yuan (US$16.5 billion) in infrastructure, according to a China Business News report.

The cost of Beijing’s finished infrastructure in 2013 was pegged at 178.57 billion yuan (US$29.3 billion), mainly spent on transportation, communications and public services. The cost of Shanghai’s completed infrastructure and the real estate market during the same period stood at 104.33 billion yuan (US$17.1 billion) and 281.96 billion yuan (US$46.2 billion), respectively.

Although Tianjin did not disclose detailed information, last July the city’s infrastructure construction cost was estimated to be more than 140 billion yuan (US$22.3 billion), which made its investment in urban construction a record 300 billion (US$49.2 billion), along with real estate market development.

Also during the last year, Guangzhou spent 287.49 billion yuan (US$47.1 billion) on city improvement.

 

Filed under Macro Trends

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