Initiative for U.S.-China Dialogue on Global Issues

Global Infrastructure Construction Peak

A good number of developing countries have urgent infrastructure construction demands in the process of industrialization and urbanization. Some need to rebuild roads, bridges, and power stations destroyed during wars. Others are in need of industrial parks to facilitate their economic development. According to the World Bank, developing countries still need much more investment in infrastructure construction to maintain economic growth and ensure future development.

In addition, developed countries need to tackle aging infrastructure and are investing more in both maintenance and reconstruction. According to an estimation by The American Society of Civil Engineers (ASCE), to make sure the American infrastructure system works in good condition, a total of $3.6 trillion should be invested in ten years. ASCE also claims that America will pay even steeper prices if infrastructure construction is not carried out.

Globally, cross-regional infrastructure connectivity is in growing demand. The 2014 Beijing APEC Summit agreed on a Connectivity Blueprint to promote regional connectivity by 2025, based on the belief that building all-around infrastructure connectivity will boost economic and job growth. Currently, the China-ASEAN free trade area has taken infrastructure connectivity as a priority for cooperation; African countries are pushing forward the Programme for Infrastructure Development in Africa (PIDA); European countries are also implementing the Connecting Europe Facility programme. In a word, the global community is witnessing a new wave of infrastructure construction and investment.

The Challenges Facing the United States

In his article How to Fix America’s Infrastructure published in Foreign Affairs 2016, Aaron Klein observes that almost all areas of American infrastructure facilities are facing problems. They are old and lag in technology: bridges are structurally deficient or obsolete; roads are congested and full of potholes; ports are worn-out; trains are unable to speed up and traffic jams trouble almost every city.

To cope with these challenges, Trump set up the “A Trillion Dollars Infrastructure Plan.” He promised, “We’re going to rebuild our infrastructure, which will become, by the way, second to
none, and we will put millions of our people to work as we rebuild it.”    This is a huge plan, but it has a tough, long way to go. Both parties in Congress agree that infrastructure is desperately needed. The roadblock is in where to find the money. The U.S. government has long been facing severe fiscal deficits. Raising taxes and going further into debt are evidently both off the table. Besides, America is not well-prepared for the plan in terms of construction machinery equipment, technologies, materials and labor force. To tackle these issues, America needs private investors and foreign investment.

China Strives to Strengthen Global Infrastructure Construction

Over the last three decades, China has developed rich experience, mature technologies, and companies and personnel abundantly experienced in infrastructure construction. It is also capable of manufacturing large equipment and has ample financial resources.

In the meantime, China is taking part in increasingly greater investment and construction in overseas infrastructure projects. The New Development Bank and the Asian Infrastructure
Investment Bank are remarkable innovations that have set up a multilateral financing system for investment in infrastructure in emerging markets. Moreover, the One Belt, One Road Initiative not only enables China to venture into global infrastructure construction and international production capacity cooperation, but also to create opportunities for countries along the route to upgrade their infrastructure. 

With business expanding to over 190 countries and regions, China’s infrastructure constructions encompass railways, electric power, telecommunications, building materials, and engineering machinery. Asia and Africa remain the major destinations of Chinese project contractors. Cooperation with Central and Eastern Europe and Latin America are also in progress. Meanwhile, Chinese enterprises endeavor to make breakthroughs in medium to high-end markets in Europe and the United States by means of mergers, acquisitions and investment. 

Possible Ways of Cooperation

Currently, the U.S. government is urged to make the largest infrastructure capacity expansion and modernization since the 1950s, while China has the largest foreign exchange reserves and rich experience in infrastructure construction. Sino-U.S. cooperation in infrastructure construction will bring huge economic benefits to the two countries and promote a more stable bilateral relationship. Both China and the United States should make effective policies to promote bilateral cooperation in this area.

Based on the above analysis, three major ways can be identified for the two sides to form cooperative partnerships:

• Financial investment. At present, being held back by their own economic conditions, European countries, Japan and other developed economies cannot invest much in the American market. Meanwhile, China has large foreign exchange reserves and a powerful investment portfolio. In this light, China could become a substantial investor in American infrastructure construction and bridge the financing gap facing the U.S. government. At the same time, China will be rewarded with tangible economic interest from construction material exports, labor export and project construction contracts.
• Material supply. Chinese companies can supply construction materials, semi-manufactured products or made-up articles and related parts to the U.S. Although the famous “Verrazano-Narrows Bridge Repaired With Chinese Steel” event has prompted American steel manufacturers to call for import restrictions on Chinese steel, China’s advantages in certain materials and technologies cannot be denied. Reasonable imports from China will save the United States a lot of money and time, while exports to America will mitigate China’s overcapacity in steel, building materials and the chemical industry.
• Package-service featured by project contracting. Currently, project contracting is the major pattern for Chinese companies to participate in global infrastructure construction. Chinese companies are qualified to provide package service from the design, construction, operation, and maintenance to financing stages. Taking transportation infrastructure as an example, China has rich experience and key technologies in high-speed railway, airports, ports and municipal transportation systems, which opens opportunity for win-win cooperation between the two sides.

Amy Duan is currently pursuing her master’s degree in translation studies at Beijing Foreign Studies University.