Bent Flyvbjerg

By Bent Flyvbjerg

One belt, one road: is China a model to follow or avoid for infrastructure investment?

China’s three-decade infrastructure investment boom shows few signs of abating. Is China’s economic growth a consequence of its purposeful investment? Is China a prodigy in delivering infrastructure from which rich democracies could learn?

The prevalent view in the economics literature and policies derived from it is that a high level of infrastructure investment is a precursor to economic growth. China is held up as a model to emulate. Politicians in rich democracies display awe and envy of the scale of infrastructure Chinese leaders are able to build.

Based on the largest dataset of its kind, our team at Oxford did a study* that punctures the twin myths that:

1.Infrastructure creates economic value, and

2.China has a distinct advantage in infrastructure delivery.

Far from being an engine of economic growth, the typical infrastructure investment fails to deliver a positive risk-adjusted return. Moreover, China’s track record in delivering infrastructure is no better than that of rich democracies. Investing in unproductive projects results initially in a boom, as long as construction is on-going, followed by a bust, when forecasted benefits fail to materialize and projects therefore become a drag on the economy.

China’s track record in delivering infrastructure is no better than that of rich democracies.

Where investments are debt-financed, overinvesting in unproductive projects results in the build-up of debt, monetary expansion, instability in financial markets, and economic fragility, exactly as we see in China today.

Our study concludes that poorly managed infrastructure investments are a main explanation of surfacing economic and financial problems in China. We predict that, unless China shifts to a lower level of higher-quality infrastructure investments, the country is headed for an infrastructure-led national financial and economic crisis, which is likely to spread to the international economy.

China’s infrastructure investment model is not one to follow for other countries but one to avoid.


*) The text above is a summary of the following study: Atif Ansar, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn, 2016, “Does Infrastructure Investment Lead to Economic Growth or Economic Fragility? Evidence from China,” Oxford Review of Economic Policy, vol. 32, no. 3, autumn, pp. 360–390; DOI: 10.1093/oxrep/grw022. A free pdf with the full study may be downloaded here:

Keywords: One Belt, One Road, infrastructure, economic growth, fragility, investment theory, China, transport, cost overruns, benefit shortfalls, cost–benefit analysis, optimism bias, planning fallacy.

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