Infrastructure’s Role in Lowering Asia’s Trade Costs
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Infrastructure’s Role in Lowering Asia’s Trade Costs

Building for Trade

Edited by Douglas H. Brooks and David Hummels

This book analyses and draws policy implications from infrastructure’s central role in lowering Asia’s trade costs.
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Chapter 7: Infrastructure Development in a Fast-Growing Economy: The People’s Republic of China

Liqiang Ma and Jinkang Zhang


Liqiang Ma and Jinkang Zhang INTRODUCTION 1. The People’s Republic of China (PRC) has experienced high economic growth driven by exports and investment since its reform and opening-up policy implemented in 1978. The fast-growing economy calls for rapid infrastructure development. In order to facilitate trade and investment, a large amount of investment has been allocated to transport infrastructure construction since 1978, which has achieved unprecedented development. In particular, investment in coastal ports construction has been enlarged in order to enhance the role of ports as gateways to international markets. Furthermore, local governments have made big efforts to improve physical infrastructure in order to attract foreign direct investment (FDI), which is mostly involved in exporting activities. The majority of export-oriented FDI flowed to coastal regions which have geographical advantages for exporting activities; these coastal regions subsequently became important manufacturing and exporting bases of China. Due to this uneven regional development, infrastructure and logistics services in coastal regions are much more advanced than in inland regions. However, as labour costs and land costs are becoming more expensive in costal areas, foreign investors are looking for new manufacturing locations in inland China, which is endowed with cheaper labour, cheaper land and abundant natural resources. Thus transport costs from inland areas to costal ports is an important part in total trade costs when enterprises are doing international business in inland areas. However, transport costs for goods originating from inland provinces are very high due to poor logistics infrastructure1 and logistics services.2 Congestion occurs...

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