India, China to Make Huge Infrastructure Investments over Next 5 Years

A pair of new reports from London-based consulting firm Trusted Sources and Urandaline, an Australian consultancy that specializes in capital-intensive industries, says that India and China will between them put $1.5 trillion into infrastructure improvements and modernization over a five-year period. “Both countries are investing on a massive scale,” Larry Brainard, chief economist at Trusted Sources, said in a prepared statement, “and this is creating attractive long-term investment opportunities, both in specific projects as well as in companies that are positioning themselves to meet the new demands for resources, expertise and technology. To sustain economic growth, both countries urgently need more and better infrastructure.” The larger of the two reports, “China Infrastructure: Playing the Boom,” runs 240 pages and covers development and investment opportunities in five key sectors of infrastructure: electric power, railroads, coastal ports and harbors, inland water transportation, and water supply. The report notes that China’s current Five Year Plan (2005–2010) includes infrastructure expenditures totaling more than $1 trillion, much of which will be made by the central government and local authorities. The second report, “India Infrastructure: Playing Catch-Up,” is 200 pages and covers a similar, but not identical, list of five major infrastructure sectors: electric power, roads, ports and harbors, airports and civil aviation, and railroads. Trusted Sources and Urandaline note that nearly $500 billion is budgeted for infrastructure spending in India’s 2007–2012 five-year plan, almost double the proportion of GDP earmarked in the previous plan. For context, the companies point out that the United States spends $400 billion on infrastructure annually, versus a 2007 GDP of $46 trillion. China and India’s combined investment of about $300 billion annually is versus a combined GDP of about one-tenth of the United States’. Pete Culliney, director of global research for Real Capital Analytics, New York, told CPN that as remarkable as India’s growth has been, the lack of a modern infrastructure has been holding that country back, and they know it. “The Indians have found that they need to address these issues.” As electricity grids and road networks are upgraded and extended, Culliney said, “buildings crop up along these things.” And if India can indeed make such improvements, that could well strengthen the already robust growth in its commercial real estate markets.Delores Conway, director of the Casden Forecasts at the University of Southern California’s Lusk Center for Real Estate, told CPN that although China has invested heavily in its ports in recent years, the road networks leading to and from those ports are subpar by comparison. In a globalized economy, she emphasized, it’s crucial to get cargo containers to and from ports quickly and smoothly. Conway also noted that the devaluation of the U.S. dollar and the expansion of China’s middle class will continue to drive growth in exports to China, which in turn will boost demand for inland distribution centers there. Conway compared the Chinese port situation with Southern California’s Alameda Corridor, a 20-mile rail freight “expressway” that connects the ports of Los Angeles and Long Beach with the national rail network. The line went into operation in April 2002 and handles an average of 43 trains a day, substantially relieving congestion on the Long Beach Freeway and elsewhere in the region. The corridor, she noted, has hugely boosted industrial, and later office, development in California’s Inland Empire, around Riverside and San Bernardino.