Chinese Infrastructure Is Ready to Rival the Ancients

Construction and infrastructure continue to be driving forces in many economies.

Over the coming years, some of these projects are also likely to change the shape of the global economy.

China and India are the most populous countries in the world. They each have mammoth plans for construction and infrastructure.

Graham Robinson, the director of Global Construction Perspectives, says the plans put the world on track for the biggest building boom since the pyramids or the Great Wall of China were built.

In 2013, Chinese President Xi Jinping announced mammoth plans for his ‘One Belt, One Road’ policy. This has China looking to revive the silk trade routes of centuries long gone.

It looks as if it will transform trade between the East and the West.

The plan involves the ‘Silk Road Economic Belt’ and the ‘21st Century Maritime Road.’ The ambitious scheme will cross more than 65 countries. The plan seeks to gain diplomatic allies and open up markets between Asia and Europe.

President Xi has called it ‘the project of the century.’ The initiative is motivated by a desire to boost economic growth in both China and nearby countries. This will provide a growing market for trade.

It’s the largest overseas investment plan ever launched by a single country. According to ratings agency Fitch, US$900 billion of projects are planned or under construction.

The land-based projects are the belt. China wishes to finance and build a massive road and railway infrastructure across central Asia and the Middle East extending to Europe.

Chinese infrastructure spending

Train travel at a speed of 300km/h is part of Beijing’s big sell. China claims an ability to build high-speed railways more cheaply than its competitors. It wishes to share its engineering technology to spearhead global ambitions.

China has put a great deal of emphasis on high-speed rail. The scale is enormous. The Center for Strategic and International Studies, a Washington-based think-tank, estimates the total value of 18 Chinese rail schemes at US$143 billion.

The railway scheme alone is bigger than the Marshall Plan which helped revive Europe after the Second World War. And rail is only part of the project.

The ocean-based projects are the maritime road component of One Belt, One Road. These projects seek to link China to ports in Southeast Asia, east Africa and the Mediterranean by sea.

The maritime road project is not some pie-in-the-sky fantasy. In the past year alone, Chinese companies have announced plans to either purchase or invest in nine overseas ports. The total value is estimated at more than US$20 billion, a sharp rise from the US$9.97 billion spent in the previous year.

Once the plans got started, there has been growing interest from companies in China and partner nations to participate in new projects. What once seemed an ambitious plan has quickly become a reality.

Some countries worry that Beijing is using its business policy for a strategic agenda. Ownership of ports could allow them to collect intelligence. They could even be used to host military forces.

When it was formally announced by President Xi in 2013, One Belt, One Road was motivated by the need for continued economic growth.

Exports to developed countries and spending on infrastructure at home were previously the biggest drivers of Chinese growth. These are seen as less viable in the longer term.

China believes that building infrastructure in nearby developing countries will boost their economies. As these developing nations grow, they will become bigger customers for Chinese exports. 

India doesn’t want to be left behind here. It will leapfrog Britain and France this year to become the world’s fifth-biggest economy by output of goods and services.

India’s Prime Minister Narendra Modi sees improvements in infrastructure as an important part of economic reform. The cost of the Indian infrastructure projects will be as large as Canada’s GDP.

Key projects include more than 80,000kms of new highways, the Delhi Mumbai Industrial Corridor and the Indian Smart Cities Project.

At Cycles, Trends and Forecasts, Phil Anderson has often talked about projects that become ‘the biggest’ or ‘the best’ in history. He reckons it’s typical for where we stand in the cycle.

The plans are in place now. The projects are often completed right at the peak of the cycle.

In order to help in his forecasts, Phil developed his Grand Cycle Theory.

The Grand Cycle Theory is the perfect tool in forecasting market moves, especially real estate and global stock markets.

Phil has summed it up in a picture that’s worth a thousand words:

18 year real estate cycle


Source: Cycles, Trends and Forecasts
[Click to enlarge]

Phil has used his theory to accurately predict market moves time and time again. It flies in the face of conventional wisdom on Collins Street and Wall Street.

Imagine the benefit of having such foresight. Back in 2004, Phil warned of the ‘winner’s curse’ phase that was about to unfold. This proved to be the final couple of years into the peak of the cycle.

It was when real estate buyers were leapfrogging each other, chasing higher and higher prices into the peak in 2007. All of it financed by reckless lending from the banks. Maids were able to borrow $1 million without any hope of being able to repay.

Importantly, Phil also forecast the best time for buyers to step back into the market to buy real estate and stocks. Years ahead of the event, he said that real estate prices would bottom out in 2010/11. And that the stock market would bottom out a year or two beforehand.

History proves this foresight was remarkable.

Go here for a brand new video demonstration of how you can use the theory to predict market moves.

Regards,

Terence Duffy,
Lead Researcher, Cycles, Trends and Forecasts


Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come — which he details in Cycles, Trends and Forecasts.


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