China's New Deal: Modernizing the Middle Kingdom

To cushion itself against recession, China is investing in one of the most ambitious public-works programs ever seen

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Ariana Lindquist for TIME

Farmer Wei Xinyuan plows his field in the shadow of the Baling River Bridge in Guizhou province.

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Shen says government infrastructure projects have already created 20,000 jobs in Chongqing this year, mostly in construction. He outlines development plans that could pass for a battle strategy, with lines of attack — in this case, faster rail lines — spreading from Chongqing across the country. In response to the economic crisis, Beijing accelerated its schedule for improving the country's rail networks by five years. As a result, travel time for a train journey from Chongqing to Beijing is expected to fall from 25 hours to seven by 2015. That's just the start. Another runway will be added to Chongqing's airport, the electrical grid will be upgraded, $5.8 billion will be spent on improving public water supplies, and wastewater treatment will be expanded to cover 90% of urban sewage, up from about 70% now. (See pictures of China's electronic waste village.)

In Chongqing, signs of public-works programs are everywhere. A walk through the extensive stairways and underground markets that make up the city's downtown is interrupted by detours and periodic detonations, the result of work on a new light-rail system scheduled to be completed by 2011. "We still need at least 20 years to develop infrastructure to catch up with developed countries," says Shen. "For China, the infrastructure projects are not only temporary measures to get the country out of the downturn but an opportunity to prepare for the economy to take off in the future."

China is using the stimulus package to play catch-up on another front: the environment. Three decades of rapid, unchecked economic growth has turned many of the country's rivers into cesspools and lands into wastelands and much of its air into grimy soup. Some $30.9 billion has been officially allocated under the stimulus plan for "environmental projects" to help clean up the mess and put the country on a path to more sustainable development. The government of Jiangsu province, for example, recently announced a $16 billion plan to clean up Lake Tai, once famed for its beauty and abundant fish but now better known for the choking algae blooms caused by industrial runoff that has made the water undrinkable for the millions who depend on it. "We are not taking environmental protection as a second priority," Jiangsu Governor Luo Zhijun recently told local reporters. "For us, it is just as important as economic development."

Mountain High, Emperor Far Away
No matter how well intentioned, China's stimulus package may provide little more than a short-lived growth blip if officials are unable to control the perennial bugbear of Chinese economic development: pervasive corruption in local and provincial governments, which make their own way far from the brilliant technocrats in Beijing. (Read "The Secret Memoir of a Fallen Chinese Leader.")

Take the case of a project already under construction in Yan'an, the end point of the Long March, a place steeped in symbolism for Chinese people. A few steps from a memorial to Zhang Side — a soldier who, after being killed while hauling charcoal in 1944, was picked by Mao Zedong to serve as an example of selfless communism — is the entry to a tunnel. Someday it will be part of a highway that leads west from Yan'an. The key word is someday. The Shazuimao tunnel, which faces a mountain that bears giant characters in Mao's calligraphy reading SERVE THE PEOPLE, has been delayed four times by workers protesting over unpaid wages. The city's transportation department and the local Communist Party discipline office are investigating allegations that the company originally hired to dig the tunnel subcontracted the work to an unqualified firm while pocketing a portion of the funding. "There's always money and corruption involved," grumbles a farmer named Wang who lives nearby. Authorities haven't completed their investigations, but there's no denying the delays. A banner at the mouth of the tunnel announces a completion date of October 2008. "This project has been a disaster for us," says Wang. "We would be lucky to have it done by this October."

Graft was rife in construction projects long before the current downturn. "Public spending is already subject to considerable siphoning off and, perhaps even more critically, waste," says Andrew Wedeman, a political scientist and Chinese-corruption expert at the University of Nebraska. During the boom years, such waste mattered less because growth was so robust. But if China's GDP expands only 6% to 8% this year, as some predict, corruption could dampen recovery. "What really matters is not if funds will be siphoned off or how much will be siphoned off," Wedeman says, "but rather whether the siphoning will have a clear and negative impact on the central government's efforts to restimulate the economy."

But notwithstanding the amounts that will disappear into bank accounts in Hong Kong, casinos in Macau and the gaudy houses that stud the outskirts of every Chinese city, China stands to gain more than it loses through its building campaign. The scale of its needs remains immense: the country's leaders are, after all, attempting to move more people out of dire poverty and into something like comfort in a shorter time than has ever been seen before in human history.

And so the work goes on. At the base of a $527 million bridge being built across the Yangtze River in Chongqing, dozens of dump trucks and backhoes rumble amid boulders and mud to prepare an access road to the span, scheduled to be completed this month. "It's good not having to worry about finding work and getting paid," says a laborer named Yang, who is helping construct the Chongqing Grand Theater, a magnificent music and opera house being built on a river headland within sight of the Chaotianmen bridge. "There are so many public projects going on, there will always be a place for me."

See pictures of Shanghai.

See pictures of Beijing.

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