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US Infrastructure: Made in China?

April 1, 2015 by Blog Editor

Could US infrastructure be a potential source of external infrastructure investment for China? Economist Sanjeev Sanyal weighs in at the Economic Forum for India, held at the London School of Economics and Political Science on 14 March.

china-infrastructure

His comments suggested a possible shift in the future relationship between the United States in China.

China today has a saving rate of nearly 50% of GDP. This has led to a rapid rise in investment in China, including new infrastructure projects on a pharaonic scale across the nation. Eventually, China will run out of internal projects to invest in, but is still likely to maintain a high investment rate. In an environment of capital surplus and a dearth of investing opportunities, China’s current account surplus could paradoxically become a liability.

The United States offers an unparalleled investment opportunity for China. Only the US can absorb such a large amount of capital: the US presents a massive opportunity for infrastructure spending. Neglected for years, US bridges totter, roads crack, and airports face wide scale delays due to the lack of capacity.

Sanyal pointed out that the Mumbai Airport is much more modern than New York’s LaGuardia; such neglected infrastructure presents a great investment opportunity. This suggests that whilst infrastructure investing in China faces diminishing returns, infrastructure in the US provides potentially higher profts for Chinese investors. For the US, this will create a massive defcit and for China a surplus. However, if not squandered and executed effectively, the infrastructure spending in the US should pay for itself and beneft both countries in the long term. 

By Antone Christianson-Galina

 



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