China's Bailout: Accelerating Logistics Infrastructure Investment

The Wall Street Journal today highlights a key part of China's announced bailout: accelerated investment in roads, bridges, and other related infrastructure:

"Much of the $586 billion stimulus package China unveiled this week will go toward building highways, railroads and airports. Already, according to official estimates, infrastructure spending had been increasing by an average of 20% annually for the past 30 years -- a tried and true engine that has helped power the Chinese economy's explosive growth."

China's supply chains stretching into the less developed western regions have often been hampered by less than ideal public infrastructure--such as roads, rail and airports. This physical architecture can greatly enhance performance in existing supply chains and allow entrepreneurs to develop new opportunities where the quality of public infrastructure either makes or breaks a business:

"Yang Zhenghua, a genial 34-year-old with a buzz cut, makes the run from Qijiang to Chongqing most days, bringing a truckload of farm produce to a wholesale market in the city. Traveling on the new highway, he can now get to the market earlier in the day, when demand is highest. The shorter journey has trimmed transport costs -- his biggest single expense -- by around 100 yuan ($15), to around 600 yuan ($90) a load.

"For 14 years, Mr. Yang has distributed produce from around Qijiang, supplying farmers with seeds and ordering crops in advance. Last year, he started raising crops himself on land leased from several farmers. "Without the highway, we wouldn't dare to develop this," he says, gesturing toward his fields of corn, eggplant and chili peppers. He has 20 farmers working for him on this site, and he is adding more at other locations. Other local farmers are expanding plantations of papaya and Sichuan peppercorns, both high-value crops that can now be sold in bulk because of access to big-city markets."

However, the resulting industrial growth of these expanding and more efficient transportation networks will strain the environment:

"The last decade's explosive growth in automobile use has also come under more public scrutiny in recent years, as air quality worsens. China is the world's biggest emitter of sulfur dioxide, a major component of the urban air pollution that causes 350,000 to 400,000 premature deaths a year in China, according to a joint report last year by the World Bank and the Chinese environmental agency."

This is why high performance supply chains require tuning of every supply chain architecture, and environmental problems are opportunities where businesses can develop the use of green technologies as part of their innovational architecture towards improving the environment for Chinese communities. Financial and physical architectures are usually the first to get attention in building supply chains, with the other architectures being developed as supply chains develop and become more sophisticated in order to maintain competetive advantages and increase efficiencies.