China's Sensible Infrastructure Boom

Moneybox
A blog about business and economics.
Nov. 28 2013 2:47 PM

China's Sensible Infrastructure Boom

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Shenzhen Bay Port.

Photo by PAUL HILTON/AFP/Getty Images

China is an extremely large country with over triple the population of the United States of America. It's also got a moderately corrupt government and a massive surge in infrastructure investment going on. Under the circumstances, there are doubtless dozens of ill-conceived projects under way on any given day. But I am astounded by the regularity with which things I see western observers denounce as examples of excess end up looking quite sensible.

Consider Shenzhen's new Terminal 3 which everyone seems to agree is great, but which Simon Calder says "could prove a white elephant" given "overseas airlines' appetite for flying to the city as opposed to the more established nearby hubs."

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Specifically he notes that Shenzhen's airport "suffers from the proximity of Hong Kong airport, with which it has a direct ferry connection" as Hong Kong "handles twice as many passengers, with vastly more international destinations."

So how about that Hong Kong airport? Well, it turns out that Hong Kong's airport is so popular that it's running out of capacity and the airport authority wants to build a third runway. Given the geography of the airport it's a challenging engineering task that will cost over $17 billion and take at least eleven years to complete. Under the circumstances, it seems to me that it makes perfect sense for the nearby city of Shenzhen to be expanding and upgrading its own airport. Calder says the alleged white elephant in Shenzhen cost just $1 billion to complete which certainly makes it look like the cost-effective way to expand local airport access. It is no doubt true that many airlines, especially western ones whose customers may not even know what Shenzhen is, will prefer to fly to Hong Kong. But a terminal that exists today (as opposed to in 2024) and that cost $1 billion to build (rather than $17 billion) is naturally going to have some attractions.

Meanwhile, Hong Kong aside Shenzhen's urban population of seven million makes it a bit larger than the Dallas-Fort Worth metro area. Slightly smaller American cities such as Houston, Philadelphia, Miami, Washington, and Atlanta all have their own major airports. Why shouldn't Shenzhen? Historically it hasn't needed one because Shenzhen's been poor and close to Hong Kong. But with Hong Kong's airport full and China getting less-poor by the day, this seems like a great time to rectify that. For now Singapore, Bangkok, Seoul, and Tokyo seem are the only international destinations served by the airport. But is it really so crazy to think a city of seven million will want to be able to fly to Hanoi, Manila, Jakarta, Kolkata, Kuala Lumpur, Syndey, Dubai, Karachi, and Los Angeles without needing to first drive to the overcrowded airport in the city next door?

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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