Trump should learn from China’s experience for his infrastructure overhaul

By Hu Weijia Source:Global Times Published: 2017/4/6 0:08:39

US President Donald Trump has proposed a $1 trillion package for rebuilding America's infrastructure, but making the initiative a reality will not be an easy thing. At the least, there is a need for deep institutional reforms to inject new vitality into  the US economy.

Speaking at a White House meeting for business leaders, Trump vowed to speed up the approval process for infrastructure projects. Some approvals can take a decade, making infrastructure projects almost a profitless endeavor in the US. It will be impossible for the country to witness an infrastructure boom without extensive administrative reforms.

China's spending on infrastructure stood at 11.9 trillion yuan ($1.7 trillion) in 2016, a 17.4 percent increase from the previous year, and infrastructure investment now serves as a main growth engine for China's economy. How did China achieved that success? In the past decade, the central government ramped up efforts to simplify the approval process for infrastructure investment, while the Ministry of Environmental Protection streamlined administrative hurdles and delegated power to lower levels of the government to accelerate approval for projects that did not significantly impact the environment or ecology.

Additionally, the central government gave greater flexibility to local authorities to deal with rising local government debts. Trump's initiative to rebuild the US' infrastructure is not a new political strategy. Former US President Barack Obama said in 2014 that "it makes no sense that we have a first-class economy with second-class infrastructure," but his plan was not implemented smoothly, partly due to fiscal issues. The challenges faced by Trump in rolling out infrastructure projects will be no less than those faced by his predecessors. A US infrastructure boom requires governments at all levels to raise spending. However, the country has to ensure that the government debt is controllable. China's experience could be used as a reference for US authorities to launch new financial instruments to fund infrastructure projects.

The public-private partnership model is vital to the development of infrastructure in China and has been promoted as a good way to ease financing difficulties for local governments,  as it allows governments and private enterprises to work together to finance infrastructure projects. Private enterprises gain income mainly from service charges and government subsidies. The US may need to increase charges on highways and for other service facilities to attract investment from the private sector.

China and the US share a large potential for infrastructure cooperation, and the upcoming meeting between Chinese President Xi Jinping and Trump offers an opportunity for the two countries to enhance cooperation.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

Posted in: EYE ON THE ECONOMY,COMMENTS ON SINO-US RELATIONS

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