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China: Capital Construction
Country Study > Chapter 7 > Industry > Construction > Capital Construction

CAPITAL CONSTRUCTION


Since the 1950s, the capital construction industry has been plagued by excessive growth and compartmentalization. There were frequent cost overruns and construction delays, and resources were overtaxed. Project directors often failed to predict accurately the need for such elements as transportation, raw materials, and energy. A large number of small factories were built, providing surplus capacity at the national level but with deficient economies of scale at the plant level. Poor cooperation among ministries and provinces resulted in unnecessary duplication. Because each area strove for self-sufficiency in all phases of construction, specialization suffered. Since the early years of the People's Republic, overinvestment in construction has been a persistent problem. Fiscal reforms in 1979 and 1980 exacerbated overinvestment by allowing local governments to keep a much greater percentage of the revenue from enterprises in their respective areas. Local governments could then use the retained earnings to invest in factories in their areas. These investments, falling outside the national economic plan, interfered with the central government's control of capital investment.

In 1981 the economy underwent a period of "readjustment," during which the investment budget for capital construction was sharply reduced. This administrative solution to overinvestment proved ineffective, and later reforms concentrated on economic measures such as tax levies to discourage investment. The issuance of interest-bearing loans instead of grants was also intended to control construction growth. Despite reforms, capital construction continued at a heated pace in 1986. The majority of the new investment was unplanned, coming from loans or enterprises' internal capital.

During the Seventh Five-Year Plan, 925 medium-and large-scale projects were scheduled. The government planned to allocate -Y1.3 trillion for fixed assets, an increase of 70 percent over the Sixth Five-Year Plan. Forty percent of the funds were allocated for new projects, and the remaining 60 percent for renovation or expansion of existing facilities. Some of the projects involved were powergenerating stations, coal mines, railroads, ports, airports, and raw-material production centers.

Data as of July 1987




Last Updated: July 1987


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for China was first published in 1987. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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