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China’s ambitious infrastructure projects are harming its economy

An Oxford report found half of China's infrastructure built in the last 30 years wasn’t worth the cost of construction

Leaving a home in the middle of a highway is far from the only unfortunate result of China’s big-and-fast approach to road construction. While a number of countries admire China’s ability to quickly build large-scale transportation infrastructure, a new study suggests the country might want to spend a little more time on cost-benefit analysis.

Researchers at Oxford’s Saïd Business School analyzed 95 large-scale Chinese transport projects, comparing the numbers to 806 transport projects in other countries. They found that 75 percent of China’s transport projects underestimated the actual cost of construction, resulting in more than half of the country’s infrastructure investments costing more than the benefits they generated.

"Our estimate is that infrastructure cost overruns have equalled approximately one-third of China’s $28.2 trillion debt. The investment boom in projects with poor outcomes has created harmful macroeconomic consequences, with China being the most indebted of 25 emerging markets," said the study’s co-author, Dr. Atif Ansar, to Global Construction Review.

While the average construction timeline for Chinese road and rail projects is just 4.3 years—much shorter than the 6.9-year average for other countries—the effectiveness of the projects was wildly divergent, according to the report. Traffic on two-thirds of China’s new roads was dramatically underestimated, falling short on an average of 41.2 percent, while traffic on the remaining third of roads was extremely high and congested.