"It's the infrastructure, Stupid!"

A sudden and exponential growth of financial capital is gushing into the markets today when major economies act to bolster economic recovery from coronavirus pandemic. Fiscal policies and monetary easing will help, especially, the most vulnerable through the eerie virus spread and enhance SMEs’ capability to weather the crisis. Hit first and most severely by the pandemic and also the first to contain it , China is revving up endeavors to control continued economic fallout. Since January, Chinese government has been injecting cash into financial system and the central bank – People’s Bank of China – continues to relax constraints over banking sector to shore up liquidity. 

Stimulus triggers both expectations and fears of infrastructure investment. China pumped 4 trillion yuan RMB (USD 572 billion) a decade ago into its stimulus package, mostly spent on large-scale infrastructure projects, such as high-speed railways, highways, and airports, as well as property and heavy fossil fuel industrial projects. On one hand, people enjoy much improved services and quality of  life today; on the other, mountain of debts derailed financial stability, and investment in fossil fuel infrastructure increased mounting environmental and public health costs. 

History shows that investing in infrastructure happens to be a most effective way to offset epidemics or pandemics and economic downturn. It helps quickly stabilize employment and growth, unleash growth potential and enhance long-term competitiveness. Jobs, financial stability and growth are among top priorities for Chinese government leaders to measure how successful its schemes will be. When climate change remains a globally recognized existential threat and also an urgent health risk, what kinds of infrastructure, undoubtedly, deserves a clear answer. 

A decade apart, China today eyes on new and quality infrastructure investment. UNIDO defines a quality infrastructure as a system contributing to governmental policy objectives in areas including industrial development, trade competitiveness in global markets, efficient use of natural and human resources, food safety, health, the environment and climate change. 

Chinese government, March 4th, announced its 3.4 trillion yuan RMB stimulus for new infrastructure, mostly around digitalization. The “new infrastructure” was first put forward in its national policy framework back in December 2018. It includes seven sector focuses - 5G, super-high voltage transmission grids, city-to-city high-speed rails and light rails, EV charging stations, big data centers, AI, and industrial internet. The strategy is clearly set to invest in third industrial infrastructure and accelerate a great economic paradigm shift towards a smart zero carbon society. 

According to Jeremy Rifkin, author of The Third Industrial Revolution and the Green New Deal, the major economic transformations in history share a common denominator. They all require three elements, each of which interacts with the others to enable the system to operate as a whole: a communication medium, a power source, and a transportation mechanism. Together, these three operating systems make up what economists call a general-purpose technology platform (a society-wide infrastructure). He emphasizes that new communication, energy, and mobility infrastructures also change society’s temporal/spatial orientation, business models, governing patterns, built environments, habitats, and narrative identify.

Chinese leadership understands the imperatives and seizes the stimulus opportunity for a much accelerated transition. The spinning coin at stake tells a striking two-side story. According to WHO, more than 3 million people worldwide die every year due to air pollution from fossil fuel combustion. As we have learned from the current pandemic, both air pollution and coronavirus pose higher risks for people with pre-existing respiratory and other diseases, leading to more severe illnesses and deaths. In the meanwhile, according to the New Climate Economy, bold climate actions will beat business-as-usual by delivering more than USD26 trillion in net global economic benefits in the 2020’s. This includes creating 65 million new low-carbon jobs by 2030. 

A clear roadmap emerges that healthy, low-carbon and smart infrastructure must be central to government-led stimulus in response to the COVID-19 pandemic. Jeremy has articulated how such an infrastructure architecture works - the digital Communication internet converges with a digitalized Renewable Energy internet, powered by solar and wind electricity, and a digitized Mobility and Logistics internet of autonomous electric and fuel-cell vehicles, powered by green energy, atop an Internet of Things (IoT)  platform, embedded in the commercial, residential, and industrial building stock, that will transform society and the economy in the 21st century. 

Timing is critical too. Back in 2009/2010, I remember how enthusiastically and vehemently I advocated China’s leadership for a Green Stimulus, against the backdrop of a failed global leadership to fight climate change. A big learning is that the required infrastructure did not exist to enable accelerated expansion of green industries to suck up the sudden downpour of financial capitals. The consequence is a let-go opportunity.

A decade apart, China’s steadfast investment in green, low carbon and smart technologies,  industries and infrastructure has set a much advanced foundation for the paradigm shift. Cutting-edge communication continues to enhance the country’s capacity and efficiency to manage its economic activities and social life. Leading investment in energy efficiency and renewable energy globally, China continues to decarbonize how to power its economic activity and social life. When fueled and powered by clean energy, the country can drastically reduce air pollution and GHG emissions when moving its economic activity and social life. 

This round of stimulus shall be utilized to enhance the new quality infrastructure that will be able to mobilize investment in new property development, new quality infrastructure and manufacturing. According to Liu Shijin, a leading Chinese economist at the State Council Development Research Center, Chinese stimulus, different from that of a decade ago, shall adopt some long-standing and also forward-looking strategic focuses. One opportunity is new property development projects to address millions of migrant workers' housing demand in cities where they have been working and supporting their families.

Another is an integrated new urbanization strategy around some large metropolitan clusters, such as the Big Bay Cluster around Guangdong-Hong Kong-Macau, the Yangtze River Delta cluster around Shanghai-Zhejiang-Jiangsu, the cluster around Beijing-Tianjin-Hebei, among others. This will create clusters of satellite townships/cities around those already well-developed large cities. Those satellite townships are expected to become clusters of advanced manufacturing too that create jobs for local residents.

Together they create some of the largest, but integrated, infrastructure investment demand ever by riding the wave of stimulus as a starting point for the coming decade. Very importantly, the government shall enforce its commitment to its ecological civilization goal.

Pandemic is a human tragedy. We have to bear the losses and work together to mitigate them. But I am delighted that governments are taking the lead and act swiftly. And more importantly, China steadfastly continues to invest in a sustainable future. "