The Role of Mega-Scale in Building Industrial Power: Some of China's Top Engineering and Construction Feats

In the field of engineering and construction, China has demonstrated its ability to learn quickly and implement on a grand scale. This is not only true in its construction of modern China but also true in its long history. The remains of the Great Wall today still stand testimony to the strength of China’s ability to galvanise technology, capital and large swathes of its population to accomplish a truly daunting task. Following what has been a 500+ year hiatus as a global superpower, in the last three decades, China under Deng Xioaping embarked on one of history’s most amazing feats of development, coordinating capital, labour and applied intellectual property on a unprecedented scale to close the enormous development and technological gap that had opened up between communist China and the developed world. Today, China again leads the world in terms of scaled infrastructure, with the world’s largest dam, the longest bridge, the largest express road network and the largest port. Scale has clearly played an important part in the build-out of China’s industrial power, which has important lessons for other industrialising countries. The key questions for China’s leaders today though are around the importance and the type of role scale will play in the country’s future.

China’s Top Engineering Feats

For 3,000 years China has been a land of superlatives when it comes to construction and infrastructure. The Great Wall, built over successive dynasties starting from the 2nd century B.C., and whose estimated total length was recently increased to 20,000km is only the most well-known of a number of super-sized ancient infrastructure achievements. China is also home to the 1,800km long Grand Canal, an arterial waterway from Beijing to Hangzhou (completed in the 7th century AD) that served as a key trade route for centuries or the Dujiangyan irrigation system (completed in the 2nd century BC), which to this day supplies water to over 5,000sqkm of farmland in Sichuan province. It is clear that in the case of infrastructure, particularly for China, scale does matter. The size of the gap between it and developed countries, the speed at which it sought to close and the size of the country itself all practically necessitated a strategy of mega-projects to build out the country and its industrial base. As a result of its efforts, China has today built (and is continuing to build) a number of engineering marvels, that are a credit to China’s energy as well as to the country’s leadership that envisaged and endorsed them. It is also important to recognise though that without the critical inputs China has received from foreign partners and the transfer of so many countries’ intellectual property, many of China’s top engineering feats would not have been possible and this continues to be the case. Accordingly, listed below are not only China’s achievements but also the contribution of foreign partners who supported them.

Does Mega-Scale Matter?

Given that gargantuan scale has been synonymous with China’s development not just during the past 30, but 3000 years, it is important to consider whether, how and why mega-projects matter, not just for China but for the world. What is clear is that the impact of mega-projects is not just an economic, but a social and political phenomenon as well. Throughout history, rising or great powers have sought to memorialise and project their capabilities and strength to both their neighbours and their own people through such monuments. Mega-projects are typically conceived by rising or great powers not only because they alone have the resources required to execute them but because (economic considerations aside) they help cement their own pre-eminent position in other people’s minds. The majority of mega-projects during the past two hundred years were conceived by the reigning super-powers of their time, e.g. the Panama Canal (1914 – United States), and going further back in history, this observation generally holds true in the 3rd millennium BC, when Egyptian pharaohs displayed their wealth and splendour with the pyramids.

Do China’s modern rulers take their place alongside history’s great powers, Chinese and other, who sought to symbolize their success and articulate their aspirations to their people through monuments? In history, many such endeavours exacted a huge price in wasted time, natural resources, capital and lives of the people killed in executing the projects. The construction of the Great Wall, for example, is believed to have cost over a million lives. In modern times, vanity projects are looked upon as the domain of wasteful dictators, not builders of countries. Modern China unequivocally aspires to be the latter and its track record of delivering its people from poverty is indeed testimony to its endeavour. More importantly, moving forward, will the ability to build a colossal hardware infrastructure be the defining characteristic of (and a requirement for being a) 21st century super power, or will this require massively scaled software-knowledge infrastructure, too?

Any future requirements aside, there has been national “Strategic Learning Value” embedded in these projects. National Strategic Learning Value being defined as a situation whereby the project is one that yields learning beyond the project itself and thereby enable the nation to adopt a relatively superior position to other nations in fields beyond the remit of the project. The strategic learning value for China is comprised of the following five factors:

  1. Exponential Multiplication of Economic Benefits.The overwhelming majority of mega-projects today (Beijing’s 2008 Summer Olympics aside ) are designed to generate long-term (net) economic benefits. Massive hydro-dams generate electricity that powers factories, high speed rail networks transport goods from producers to customers and sea-ports provide the entry- and jumping off point for international trade. Well designed and executed mega-projects enable the creation of economic value far in excess of their construction and operating costs. For example, Shanghai’s 15 year project to build-out its deep-water port is a c.$20bn project, but the port itself already generates revenues of US$3bn annually, and more importantly, handles a staggering US$1 trillion in trade every year.
  2. Rallying of People to Break Productive Norms. Mega-projects in China have also been a critical tool to rally the people to work for the good of the country. They have enabled China to set new standards for labour productivity, with physical infrastructure providing visible evidence of workers efforts, improve coordination and teamwork, and break world records for its construction.. China in the 1970s was already looking back on 20 years of rapid industrialisation, having started from close to zero at the time of the founding of the PRC in 1949. Much of this industrialisation was achieved with only the resources China had available to it at the time, namely a shortfall of capital and a surfeit of labour. During China’s initial industrialisation, patriotism and, later, Mao Zedong’s personality were key rallying points around which to break productive norms. Under the more pragmatic Deng, these were replaced by more enduring goals, such as the build-out of China’s first Special Economic Zones in Shenzhen and Wenzhou.
  3. Accruing of Critical Skills for Transference to Multiple Unplanned Areas.Mega-projects are also important tools for building new skills. In many cases, significant labour forces will need to be specifically trained in advance to execute the project. Being by definition conceived as one-offs, projects at mega-scales are bespoke in nature and designed for a single purpose. These projects will naturally test the capabilities of the planners and executors, who need to respond to resolve in real time the countless unforeseen issues that will arise, a process that will naturally build new skills that can be applied elsewhere. After the project’s completion this large new skilled labour force will disperse and pass on their knowledge in the broader economy. Without the rallying call of a mega-project, there is little chance that China could have built such a large volume of skills.
  4. Launching of Multiple New Industries, One Endeavour to Create Many. Mega-projects can also serve as incubators for the development and growth of ancillary industries. Until the Three Gorges Dam project, China’s hydropower equipment manufacturing industry was focused mainly on the domestic market and on small turbines of 300MW or less. The design of the project called for no less than 26 sets of 700MW turbines, however, forcing Chinese contractors to invest in the development of new and innovative products, which could now compete with more established products in international markets, and helped establish China’s power equipment manufacturing sector as an international competitor. It is therefore no coincidence that the largest hydropower turbine in the world under construction today (814MW) is Chinese designed and built, a project that 15 years ago would have been executable only by international players.
  5. Resetting the Boundary of What is Possible, Breaking of Self-Limiting Status Quo.Mega-projects represent both a breakthrough from the current status quo as well as a roadmap for the path ahead. Building the world’s longest sea bridge shatters any previous notions that bridges of that length are not feasible and, not-coincidentally, a break-though from the any status quo immediately raises the question where the next leap from the new position just established might go, encouraging further development and innovation. For example, the Hangzhou Bay Bridge completed in 2007 at nearly 36km in length was not only 11m longer than the previously longest transoceanic bridge, it also provided an important impetus for the 42m long Qingdao-Jiaozhou Bay Bridge currently under construction.

Of course, there are also a number of arguments that speak against a development strategy based on mega-projects:

  1. Firstly, the fundamental economic need for or benefit from infrastructure at mega-scales is not always clear, (and in some cases of course, economic benefits are the not the primary driver of mega-projects, at all). The Great Wall of China did a poor job of actually keeping out barbarians committed to invading and was breached countless times in its history. However, this has not lessened its importance as a symbol of strength, technological advancement, and identity for viewers on both sides of the wall. While in many cases China’s own mega-scale in terms of geography and population required mega-scale in terms of solutions, multiple smaller scale projects often can be equally or more efficient, given that mega-projects typically incur mega-costs. In the worst cases mega-projects can lead to wasteful diseconomies, the opposite of economic multipliers. An example of a shift away from mega-scale is China’s new urbanisation plan. In a radical break from its development priorities from prior years and decades, the new urbanisation blueprint released earlier this year calls for a de-emphasis on China’s tier one mega-cities (avoiding to further fuel the congestion, overcrowding and inflation which these cities suffer), in favour of developing clusters of smaller, more efficient cities to absorb the urban migration flows.
  2. Runaway costs are a major factor in mega-projects given the associated patriotism and symbolism. Heavily promoted and politicised, mega-projects often develop a momentum of their own, running over-time and over-budget and becoming white elephants of little to no economic value. The showcase 105-story Ryugyong Hotel in neighboring North Korea, which after nearly 30 years of on-off construction and US$750m (equal to 2% of the country’s GDP) remains unfinished to this day is an extreme example but does serve warning to planners about the risks facing heavily publicised projects.
  3. Finally, mega-projects often also create issues on an equally massive scale that need to be solved, demographic, environmental and social. Coming back to the Three Gorges Dam, the projected required the relocation of 1.4 million people with a potential further 300,000 to be relocated in the near future as they are at risk of landslides and future flooding, caused by the dam. Further, the dam’s altering of the natural tributaries of the Yangze River is believed to have contributed to the worst drought in 50 years in 2011. These issues, and planners’ ability to successfully manage them, obviously need to be closely considered when weighing mega-projects.

Mega-Projects in China’s Future: The Mega-Shift from Hardware to Software

Following its frantic thirty year build-out, China today presents a patch-work picture: The Pudong skyline can compete with any cities’ in the world in terms of impressive landmarks and its motorways are often indistinguishable from Japan’s or Germany’s Autobahn. Yet other parts of the country are still significantly underdeveloped with rural (and urban) poverty and the desperate need for further investment. Importantly, too, China itself is reaching the limits of its investment driven growth model, and seeking to transition to a consumption and intellectual property driven economy. In this context, China’s planners will need to reassess the role that mega-projects play in its development. The key considerations include:

  1. The Hardware Model: Super-scaled Industrial Projects China can certainly continue to focus on large infrastructure type projects as part of its development strategy. This will allow the country to continue to lead the world in capital intensive industries where scale is more important than innovation. While this is clearly a valid development strategy it depends on the innovation of others, who ultimately capture the largest share of value. If it adopts this path, China can continue to industrialise its rural areas, continue to dominate commodity manufacturing and continue building an endless list of “biggest” plants and facilities in basic industries. However, it is unclear how the country would then over the long term avoid the middle income trap that faces economies around the time of full industrialisation. With marginal productivity gains on manufacturing shrinking and costs rising, China will lose competitiveness and its industrial base will face increasing competition from abroad.
  2. The Software Model: IP-Driven Innovation Networks.China today has clearly stated though its goal of developing and scaling knowledge based industries and innovation, creating new industries of its own and leading in the world. When it comes to the creation of new technologies and industries, it is important to consider that scale does not always equal impact. The most important engineering achievement of the 19th century was not in construction or infrastructure, but mass electrification, and the most important innovations of the 20th were (although history may yet prove us wrong) the internet and mass mobile communications. The main reason that the US is not currently leading the world in building dams or new rail networks is not just because its existing capacity in these technologies is adequate but that that the largest value multiplier is created in knowledge industries such as high-tech or biotechnology, where it leads the world. Much of the innovation in these industries is created organically, by research institutes, entrepreneurs, universities and corporations. One strategy for China could focus on the creation of funding, communication education and collaboration networks to enable the creation and broadest application of domestically generated IP to create new industries. In this scenario the mega-projects of the future will be intangible, focused on creating the web of information and communication that drives innovation. To date, China has not yet demonstrated its ability to execute these types of projects, and doing so will require the country to fundamentally rethink its policies on censorship, media control and the freedom of speech, all of which are critical prerequisites to creating an open information environment.
  3. The Integrated Model: Combining Hardware and SoftwareWhile much of the innovation in a certain sector occur discretely and can be commercialised or leveraged through an open environment, mega-projects still have an important role to play in the creation of IP and new industries. During the past 70 years the US for example has conceived and executed a wide range of technology- and systems-based projects (e.g. the Manhattan Project, the Apollo Program) that have driven incredible innovations, spawned new industries, transformed its economy and help to underpin its global technological leadership to this day. All of the advantage of mega-projects previously mentioned (skill building, breakthroughs of the status quo, vision to rally resources, etc.) apply to IP based mega-projects, in most cases even more so than to construction and infrastructure based ones. If China is serious about take leadership in new emerging industries such as environmental technologies or electric vehicles, a mega-project or program to solve critical issues can drive and new and channel existing innovation, coordinate resources, allocate capital and accelerate the creation of new growth industries. Setting the goal and creating the program to make entire industries or regions in China carbon neutral by 2025, for example, may sound ambitious, but the US put a man on the moon in less time forty years ago.

Whichever model is best suited to China, having grown with the help of the world’s engineering and intellectual property, China has learned much. It may indeed have learned enough to continue to alienate some its past partners, the Japanese in particular, and pursue the Hardware model on its own. However, this relegates China to an industrial power in world where economic progress is increasingly based on an information age where both soft- and hardware matters. In this next phase, China’s mega-projects will be about building gargantuan software networks, information logistics, data warehouses, knowledge networks, innovation incubators and then transferring the skills to the hardware industries of the first wave of China’s build-out. The world has also learnt the price of helping China is not always a lasting reward for itself. The new trade may well require a revised model of cooperation between China and the world based on a trading of priorities.

Inevitably, China is headed towards that more uncomfortable and messy place that combines hardware and software. Of course, only the pure hardware model offers the promise of a strong centralized authority and control. However, the key reason that all the benchmarks for economies built on the software and/or integrated models lead back to the US is that these models require a truly free economy, free movement of ideas and free politics to create these more complex innovative models of growth and prosperity and the US is the most advanced in this regard. One could argue that there is no reason why China should necessarily strive for those models; it still has millions of people to bring into the “hardware” age. However, China also has one of the largest industrialised populations in the world already enjoying the fruits of the hardware model and ready to migrate to something else more fulfilling; this is a population that is not going to wait for the others to catch up. The One China, Many Systems story is now ready for the One China, Many Models story.

Notes:-

  1. Estimated for the total construction period between the 6th and 16th century
  2. Although one can argue that the countless sports and multi-purpose venues custom built for the event have a long  term economic value, the US$44bn total price tag for the Beijing Olympics as a whole almost guarantee that they will be an overall money loser in perpetuity
  3. Which does not mean that the wall wasn’t needed: Mongol (in the 13th century) and Manchu (in the 17th) invaders crossing the wall toppled the ruling Song and Ming dynasties, respectively, proving that the threats the Wall was intended to protect against were very real indeed.
  4. See the April 2014 Sign of the Times, “China’s Changing Competitiveness to 2025– Far-reaching Economic and Political Implications”