beyondbrics

Around three quarters of China’s 175 gleaming airports are losing money, many are barely used and some don’t have any flights at all.

Beijing’s solution to this problem? Accelerate the building spree with a plan to add 45 new commercial airports over the next five years, bringing the total across the country to more than 220 by 2015.

The country’s civil aviation regulator announced last week that the government plans to invest more than Rmb1,500bn ($230bn) in the aviation sector in the next five years, with the bulk of the money to be spent on new airports and new aircraft.

That compares with the roughly Rmb1,000bn spent in the sector over the last five years.

The total national aircraft fleet, operated almost entirely by state-owned carriers, will be expanded to more than 4,500 over that time from 2,600 aircraft at the end of last year.

Many of the airport projects in the works are similar to the one in the town of Jiaxing in eastern Zhejiang province, which sits roughly an hour’s drive from three of the country’s biggest international airports – two in Shanghai and one in the city of Hangzhou.

Despite a brand new high-speed rail line and numerous expressways that connect Jiaxing to Shanghai and Hangzhou the Jiaxing government is investing around Rmb300m on a commercial airport.

In private, Chinese officials outside the aviation sector say the proliferation of airports across the country is a serious concern but that the central government has trouble saying no to local officials who make the long-term economic case for improved aviation infrastructure.

Of course, the enormous opportunities for graft and skimming off the top are great incentives for the local officials to propose the projects in first place.

In the short-term most airport projects will continue to lose money in the face of growing competition from high-speed rail and lack of passenger demand for out-of-the-way destinations.

This becomes a wider economic problem when you realize that when the government says it will invest Rmb1,500bn in the aviation sector it actually means it will order state-controlled banks to lend most of that money to approved airport projects and national carriers.

In the case of Jiaxing airport, local officials say they expect to recoup all their money by 2025 but many analysts say this kind of investment will just end up as a bad loan on the books of a Chinese bank.

Related reading:
China file, beyondbrics