“China indebted to corruption”

The Australian has a piece on the rash of bridge collapses, which is being attributed to shoddy construction facilitated by the bribery system here:

In heavy, driving rain, Friday rush-hour and forced contraflow, traffic on the approach ramp to the mighty No 3 Qiantang Bridge in Hangzhou slows to a near-stagnant creep: plenty of time to take in the view.

There is the 10m gash left after the side wall abruptly fell off last month. Nearby is the 7m crack in the road, which a heavily laden lorry was swerving to avoid when it flew off the edge.

All along the bridge are 10cm scars where joints have slipped out of alignment and the shoddy concrete edges have eroded away. Finally, there is the 50-strong team of construction workers carrying-out the £6 million ($9.22m) emergency repair work that the whole debacle has triggered.

This, along with tens of thousands of other grand infrastructure projects across the country, is how the new China is being built. Not visible on the bridge are the various national engineering prizes won by the creator of this crumbling catastrophe: they sit proudly in the head offices of the Hunan Road and Bridge Construction Group.

The July accident was not the company’s first: in 2007, two more of its bridges collapsed, one at the cost of 64 lives. But what is starting to worry both the Chinese authorities and the general public is that the trouble is not restricted to HRBC and its flawed creations: in fact, the bridge collapses in China are starting to have the feel of a pandemic.

Between July 11 and July 19 this year, four bridges crumpled in different regions of China – all of them, in common with thousands of other bridges in the world’s fastest growing economy, started carrying traffic between 1997 and 1999.

Behind the accidents, say analysts, are features of the Chinese economy that could eventually become its undoing: huge corruption, an obsessive praise of construction speed over build quality, and the failure to realise the gnawing, long-term cost of both those issues.

Explanations for the various bridge collapses tend to focus on the way the contracts to build them are distributed. Via virtually non-existent tender processes, local governments hand out projects to companies they themselves own. The work itself, however, is sub-contracted down an often bafflingly long chain of smaller companies, with bribes paid at each level and successive layers of cash creamed from each strata.

By the time the first shovel of cement enters the mixer, the actual budget that remains allows for only the cheapest labour and often inferior materials.

Suggestions of corruption relating to the No 3 bridge are not new. Chinese media openly reported its failure to pass safety checks in 1997, with prominent engineers flatly refusing to have their names associated with any sign-off. A year later, a quality standard was miraculously granted, without any discernible changes being made to the bridge itself.

Looming over the whole scene is the increasingly troubling question of local government debt in China: economists are already exercised about how far dangerously high levels of indebtedness have been masked, how many of the estimated 14.2 trillion yuan ($2.09 trillion) of loans to local government entities will turn bad even if the global economy limps back to health, and how the world’s second-biggest economy will react if the brakes are suddenly applied to fixed-asset investment, currently accounting for around 70per cent of gross domestic product.

The concern is that, in the country’s unprecedented spree of infrastructure construction and other spending, local governments have already taken themselves close to the danger zone on debt: that line will inevitably be crossed if decades of shoddy work now require billions of yuan to put right.

And, unlike the money that can cheerfully be borrowed to finance projects such as bridges, stadiums, and high-speed rail lines in whose glorious light local party bosses can bask, raising the money to fix pre-existing venality and sloppiness holds zero appeal. The potentially colossal bill for repairing what China did not build right in the first place, say economists, could be the fault line on which the local debt problem starts to totter.

This is just another issue that makes me skeptical when people say the Chinese economy is invulnerable. It has huge strengths, sure, but also huge weaknesses. Would it survive a domino effect of problems like this setting each other off?

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Filed under corruption, development, economy

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