China’s latest debt filled adventure: Regional Transportation Hubs

50 cities in China are all racing to become regional transportation hubs.

More than 50 mainland cities have answered Beijing’s call for cleaner economic growth with plans for aviation hubs – airports clustered with industrial zones.

They hope the projects will attract investment in the logistics, high-technology and finance sectors, the sort of businesses Beijing is encouraging as it seeks to move the economy away from an over-reliance on smoke-stack industries.

But critics argue the projects will exacerbate the problem of debt-fuelled construction, which local authorities have used for years to boost their economies.

Such “plans often start high key, but end poorly”, government researcher Wang Jun said.

“It is not necessarily a good thing for the whole nation, as so much investment will often lead to overcapacity and increase local government debts,” said Wang, who works at the China Centre for International Economic Exchanges. “There are already signs of redundant investment, as some regions in China have too many airports, which are not in full operation.”

Wang Xiaohua, an aviation consultant at Kent Ridge Consulting in Fujian, said developing an aviation hub involved more than simply building an airport.

It first of all required minimum annual passenger flows of 10 million and cargo volume of 200,000 tonnes, she said. Only Beijing, Shanghai, Guangzhou, Chengdu, Shenzhen and Kunming met that criteria last year.

The mainland will need more airports as the economy grows, but profits are elusive. Of the mainland’s 183 airports, 143 lose money, data from the Civil Aviation Administration of China shows. That suggests that more than 60 of the 80 new airports envisioned in the latest five-year plan to 2015 will end up in the red.

More then one economist has said that the country whose debt we all should be working about is China and articles like this do little to convince people otherwise.

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