I’m no China expert, but this seems like exactly what the Chinese government should be doing:
SHANGHAI, Aug 5 (Reuters) – Beijing’s Commission of Reform and Development, the city’s economic planner, will invite foreign investors to bid on 126 urban infrastructure projects collectively seeking 338 billion yuan ($55 billion) in financing, the China Daily said on Monday.
The projects include rail transport, roads, rail transit complexes, drainage treatment facilities, waste disposal and heat supply.
The report said private bids will be treated on an equal footing with bids from state-owned firms, and predicted an internal return rate of 8 percent.
“The Beijing government will take measures to ensure investors get a reasonable return,” the report quoted Yang Xihui, commissioner of the economic planning agency, as saying.
Policymakers in China are struggling with a quandary; they want to increase infrastructure spending to prop up economic growth rates which have been sagging this year, but they don’t want to put more high-risk debt on the books of Chinese banks, which are still struggling to digest the bad loans made during the last infrastructure binge in 2009-2010.
Regulators are signalling increasing openness to foreign money, taking a series of steps to make it easier for money to get into the country through a variety of channels, including both portfolio investment and direct investment.
PS. One reason that I’ve expected China to keep growing fast is that the interior of China is still quite poor, and there are no obvious cultural differences between the interior and coastal areas that would prevent eventual convergence. Yichuan Wang has an excellent new article that makes this point much more effectively, with lots of data. Here’s an excerpt:
So when Paul Krugman boldly declares that China will suffer from a sudden drop in growth, the first question that should be asked is “which China?” Because economic conditions differ so widely across provinces, to speak of a unified level of Chinese development obscures the underlying regional patterns of growth. These patterns lead to a different understanding of the economic data and a much brighter outlook for the Chinese economy. Even if growth in developing countries must eventually slow down, a look inland shows that the mini-countries we call Chinese provinces still have a long way to go.