Infrastructure: The foundation for growth and poverty reduction

Another factor which has been crucially important for China's recent development is investment in infrastructure, from both domestic and international resources. Throughout the country, unreliable, inefficient and poorly maintained infrastructure - especially for transport, energy, water and sanitation and irrigation   was a major bottleneck. Over the last 30 years, there has been substantial support for infrastructure in rural areas, for example for irrigation systems, agricultural market development and processing techniques. This has made it possible to improve agricultural production despite extremely scarce arable land per capita. Railways, roads and other transport infrastructure has also been rapidly developed, which has made a substantial contribution to reaping the comparative advantage from crossing domestic regions and facilitated entry into global markets. The pertinence of the expression "if you want to be rich, first build a road" has been demonstrated numerous times across all parts of China.

The key experience of China's infrastructure development is not just the investment, but the policies that enabled fruitful use of resources and the capacity to maintain them. Policies were developed so as to promote economic growth and poverty reduction within a well defined institutional and financial framework. This included decentralised financial investments and revenue redistribution. It also included a division of responsibilities between the central and local authorities, between the state and private markets and between public and private actors, all of which was based on a cross regional approach. The considerable contribution of infrastructure to China's poverty reduction is now well documented. It is, however, important to understand better the mechanisms by which investments in infrastructure have brought about poverty reduction impacts in China, in order to ensure that infrastructure investments in Africa will help reduce poverty.

Many countries in sub-Saharan Africa suffer from a huge backlog of needed infrastructure. In sub-Saharan Africa, annual infrastructure needs have been costed at USD 17 22 billion while annual spending (domestic and foreign, public and private) is about USD 10 billion. The region's infrastructure financing gap is thus USD 7 12 billion per year, or an estimated 4.7% of GDP. China is helping to fill this financing gap and is now the largest external source of infrastructure projects in Africa. China's commitment for African infrastructure has oscillated at around USD 500 million a year in the early 2000s but peaked at USD 7 billion in 2006. China's infrastructure investments in Africa are mainly distributed in two sectors, power and transport, followed by telecommunications and water. China is thus following its own experience by focusing on areas that contribute to expanding the productive potential of the economy. However, further analysis can usefully assess whether these investments could make a more substantial contribution to reducing poverty in African countries. For example, cross border infrastructure is a much more pertinent issue for African countries than for China.