China: Investing in Inland Infrastructure

Over on Supply Chain Brain I came across a somewhat long article that highlights some of the logistical issues China faces as its manufacturing economy begins to pick up its forced march inland. Today, it's not cost effective to move cargo from the inner provinces to the ports for export. According to one expert quoted in the article, "Inland transport costs to the coast from provinces like Sichuan, for export to overseas markets, are often higher than the maritime transport cost from China to foreign destination ports, while inventory management, trucking and rail transport are currently inefficient."

To help bring its inland infrastructure up to global standards, the Chinese government is investing in rail, among other areas, planning to spend "$20 billion on building and upgrading the country’s railway system, which should dramatically improve the ability to move containers in and out of inland regions from coastal port cities."

Having spent time both in the coastal areas of China and ventured once inland, I can honestly say the government appears extremely serious about making the investments it needs to make. Local authorities are all the more keen to gather funding for regional projects because infrastructure investment brings business investment. And business investment brings higher wage jobs for local communities.

In my view, China's major advantage here relative to India from an inland infrastructure build-out perspective is central planning -- which allows it to dictate funding, planning and execution. India, in contrast, has to deal with that little thing called democracy. In contrast to China, its elected officials have a voice in not only how money is spent, but how its spending will impact those who they represent. And we also know that India is not exactly the easiest country to get large projects done without spreading some ghee on the proverbial skids.

Jason Busch

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