How China uses infrastructure as a means of control

China is racing to develop new infrastructure as a way of solidifying its domestic and international political power, but its iron grip on construction projects is jeopardising their success

Daxing International Airport is located 50km from the model district of Xiong’an and has been designed to cater to the growing number of visitors arriving in Beijing 

To the south of Beijing, less than 50km from the city’s historic centre, a sprawling, steel-clad creature is taking over the landscape. Its hexapodic structure allows it to stretch over a staggering one million square metres, while its gleaming golden shell gives it the appearance of some strange breed of insect. As it has swollen in size, it has swallowed everything in its path, be it migrant settlements or arable farmland.

Contrary to what one may think, however, this beast is not the subject of a dystopian science fiction film. Rather, it is Beijing’s new Daxing International Airport, designed by British architect Zaha Hadid prior to her death in 2016. The building, an impressive feat of architecture and engineering that is due to be completed in September this year, is 11 years in the making, having been proposed following the 2008 Beijing Olympics.

While the terminal’s mammoth size is purportedly designed to cater to the already substantial and growing number of visitors arriving in Beijing, the peerless scale of the project also provides the country with serious bragging rights. According to Chinese officials, the building’s 180,000sq m roof is the largest of any airport globally. Inside, the ground floor features the world’s biggest single slab of concrete. It’s symptomatic of a wider obsession with superlatives.

In a bid to redistribute growth more evenly and stimulate economic activity, the
Chinese Government is investing in infrastructure
at a rate of knots

Dr Jonathan Sullivan, Director of the China Policy Institute at the University of Nottingham, explained: “China has the capacity, the engineering skills, the ambition and money to achieve incredible things – the longest, deepest, highest, quickest – which the regime uses as a demonstration of progress towards modernity under its stewardship.”

The airport’s strategic location, just 50km from the model district of Xiong’an, certainly hasn’t escaped anyone’s notice. “Its location serves a unique role in boosting the connectivity for both Beijing city itself and also [showcasing] the New Area, which is a signature project of Xi Jinping,” Dr Xin Sun, a lecturer in Chinese and East Asian business at King’s College London’s Lau China Institute, told World Finance. Xiong’an was personally masterminded by the Chinese president, and is designed to serve as a development hub for the Jing-Jin-Ji megalopolis area, which generates around 10 percent of China’s GDP annually.

Driving demand
Daxing Airport is the latest addition to Xi’s programme of massive infrastructure development, which serves to both drive and support economic development. “China was once a poor, developing country that lacked all kinds of basic infrastructure,” said Sullivan. “Infrastructure was rightly identified as a necessary precondition for economic development.” Today, infrastructure investment is vital in achieving the high rate of GDP growth mandated by the government. China is the world’s largest investor in infrastructure, spending an average of 8.5 percent of GDP between 1992 and 2011 on the construction of roads and railways, as well as power and water facilities, according to data from McKinsey. “Highways, industrial parks, all sorts of solid infrastructure – they [all] promote economic development,” explained Sun.

This development has proved particularly key in the wake of the 2008 financial crisis, as external demand for Chinese exports declined, especially in developing nations, and the country was forced to rely more heavily on internal demand. “Infrastructure investment is like a rolling stimulus – the domestic economy needs it,” said Sullivan.

Much of the country’s economic activity is currently concentrated in eastern areas, around cities such as Guangzhou, Shenzhen and Shanghai, which have emerged as technological and trade hubs. However, in a bid to redistribute growth more evenly and stimulate economic activity, the government is investing at a rate of knots in infrastructure in northern and western areas. For example, in Hohhot, the capital of the Inner Mongolia autonomous region, construction is underway on a new $3.28bn airport that, when opened in 2030, will be able to accommodate 28 million passengers annually. In the same region, a new coalmine costing $500m is also in the works. When completed, it will have an annual capacity of eight million tonnes – twice the annual consumption of the entire country of Belgium.

A tool for control
It would be false to say that China’s infrastructure investment strategy serves solely economic ends – it is just as much about exercising political control, both over its neighbours and its international image. Projects such as the Qinghai-Tibet railway have long been viewed as Trojan horses for political power; this view was even acknowledged by former Chinese President Jiang Zemin in 2001 when the line was under construction. He said at the time: “Some people advised me not to go ahead with this project because it is not commercially viable. I said: ‘This is a political decision’.”

The opening of the Hong Kong-Zhuhai-Macau Bridge in October 2018 posed similar concerns. Pro-democracy lawmaker Eddie Chu described it as a “politically driven mega-project without urgent need”. Both Hong Kong and Macau are special administrative regions, meaning they have their own governmental and legal systems and, to all intents and purposes, function as separate nations. “From the perspective of the Chinese Government, these are Chinese territories, but they’re in conflict due to opposition from an active minority in the case of Tibet and dissidents in the case of Hong Kong,” Sun told World Finance. “Major transportation and logistical projects [such as the Qinghai-Tibet railway and the Hong Kong-Zhuhai-Macau Bridge] are definitely a tool for territorial control.”

The government, of course, doesn’t advertise them as such, but rather justifies them as a way of fostering better economic links between mainland China and disputed territories. While they may provide some benefits for local actors with regards to expanding potential customer bases and opening up new supply chain possibilities for enterprises, it would be naive to assume on the part of the Chinese Government that creating a better business environment was its sole justification. Moreover, for the majority of citizens in either region, any benefits to be derived from trade links do not outweigh the limitations in freedom that would come with Chinese state control.

Unprecedented scale
Globally, China is not able to exert the same level of political control as it can on its own citizens or semi-autonomous regions. Thus, it uses infrastructure as a method of infiltrating other nations under the guise of facilitating economic development. “Internationally, especially with regards to the developing world, infrastructure is the most effective and efficient way for China to do deals, to channel aid, to make ‘soft power’ gains and to seek influence,” Sullivan told World Finance. The most pertinent example of this tactic is the Belt and Road Initiative (BRI), a massive development strategy that centres on the construction of overland routes and sea passageways to facilitate trade between China and the rest of the world. The project, which is due to be completed in 2049 to coincide with the 100th anniversary of the founding of the People’s Republic of China, will see infrastructure corridors built through around 60 countries in Asia, Europe, Oceania and East Africa.

There are, of course, a number of economic advantages to the BRI. “China [has been] trying to export and boost production capacity to sell into other parts of the world,” explained Sun. “But the global demand is not very strong after 2008.” For example, China’s exports to Kazakhstan and Russia peaked in 2014 (see Fig 1) and have been steadily declining since then. China hopes to reverse this trend with the modernisation of the New Eurasian Land Bridge, a key overland corridor that carries goods from China through Kazakhstan and Russia and into Europe. Currently, various track changes and capacity restrictions mean sending goods via this route is lengthy and expensive, which dissuades Chinese businesses and those along the route from choosing rail as their preferred transport method.

The construction of the BRI itself also provides labour and material supply opportunities for Chinese businesses within the nations in which infrastructure is being built. “One approach adopted by the Chinese Government is lending [those nations] money, which allows them to build infrastructure using Chinese products and Chinese firms,” said Sun. “This actually yields a huge amount of business for Chinese companies, especially state-owned enterprises.” Examples include the government-controlled Gezhouba Group, which in 2017 announced it had secured a $4.5bn contract to build a hydropower plant in Angola under BRI plans. When completed, the plant will supply up to half of the country’s total electricity.

World authority
The central goal of the BRI is not economic, however, but political. “Control of critical infrastructure is a strategic benefit for China,” said Sullivan. “But the BRI is much more significant than that. It is contemporary China’s first global project – a vision on a global scale for the first time and an alternative to American-led globalisation. It is the international corollary to the Chinese Dream and it is a signal that this is a newly confident and ambitious China.” No country has ever attempted to solidify its hold on trade and globalisation with a project anywhere near as significant as the BRI; in doing so, China is sending a clear message to the international community that it intends to be the most powerful economic player in the world, and no cost is too great for it to achieve that.

In this quest for global dominance, the country is pushing its national bank account to the very limit. It has already spent an estimated $200bn on BRI infrastructure construction, a figure that is expected to rise to at least $1.3trn by 2027 and continue to rise until the project is complete. Nonetheless, “there are risks involved in underwriting such a disparate and sprawling and expensive project”, according to Sullivan. The most pertinent derives from the fact that China has lent a huge amount of money to neighbouring countries that cannot pay up front for BRI infrastructure, with the expectation of repayment once the project is providing economic benefits. “The idea is that China provides the investment for infrastructure, and the recipient countries’ [governments pay it back] using natural resources or some other revenue available,” Sun told World Finance.

Many of these recipient nations are heavily indebted regardless, and are unlikely to be able to repay China in the near future, if at all. Pakistan, for example, has been targeted as a location for new hydropower plants; of the 10 largest plants to be built under the BRI, eight will be based there. As these facilities proliferated, construction costs began to mount and loans from China weighed heavily on the country’s economy. This came to a head in 2018, when Pakistan was forced to seek bailouts from the IMF, Saudi Arabia, the UAE and China to the tune of $15bn. Sun added: “In other cases, like in the Middle East, for example, countries suffered tremendously from the drop in oil prices [in 2015] and those governments couldn’t really pay back what they’d borrowed from China.”

Projects such as the Qinghai-Tibet railway have long been viewed as Trojan horses for political power

Jeopardising success
In its unflinching quest for global dominance, China has neglected to face the economic realities of such an ambitious project. It has merrily lent to countries well below investment grade without fully considering whether they will ever be able to pay back the loans, or whether it will see enough trade benefit to outweigh its initial investment. Any logistical judgement has been clouded by the prospect of control.

The same is true even of some of its domestic projects, Daxing Airport being a key example. China has pushed ahead with construction without addressing a vital issue with its existing airport, which has nothing to do with capacity: around three quarters of China’s airspace is controlled by the country’s military, which has the power to ground civilian flights if any of its planes are in the air. This means commercial flights can be delayed for hours. At Beijing’s existing airport, average delays rack up to 43 minutes, making it one of the worst-performing airports in the world for punctuality. “This airspace control is the key reason why the previous airport couldn’t have provided more flights,” said Sun. “This is why additional infrastructure was needed, to address the delay issue and to provide capacity… But that airspace control will keep affecting the new airport.”

The government has not announced any concrete plans to commercialise more of the country’s airspace or limit military control, meaning delays will likely be just as common at Daxing Airport. They may even prove more problematic, as an increase in flights will mean a greater likelihood of delays, leaving more customers stranded in the terminal.

Through Daxing, BRI and numerous other infrastructure projects, China is attempting to demonstrate to the world that it is a genuine contender for the top spot in an economic world order that has historically been dominated by western nations. It has not yet realised, however, that it will have to adopt a more liberal approach in order to take on that role. Moreover, while China is certainly not short on cash, it also doesn’t have the funds to support half the world’s economy, which it may find itself doing if it continues lending to its neighbours in such an uncontrolled manner. The country is at risk of undermining the success of what could prove to be economically fruitful developments because it has been blinded by its own ambition.