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The prevalent view in the economics literature is that a high level ofinfrastructure investment is a precursor to economic growth. China isespecially held up as a model to emulate. Based on the largest dataset of itskind, this paper punctures the twin myths that, first, infrastructure createseconomic value, and, second, China has a distinct advantage in its delivery.Far from being an engine of economic growth, the typical infrastructureinvestment fails to deliver a positive risk adjusted return. Moreover, China'strack record in delivering infrastructure is no better than that of richdemocracies. Where investments are debt-financed, overinvesting in unproductiveprojects results in the buildup of debt, monetary expansion, instability infinancial markets, and economic fragility, exactly as we see in China today. Weconclude that poorly managed infrastructure investments are a main explanationof surfacing economic and financial problems in China. We predict that, unlessChina shifts to a lower level of higher-quality infrastructure investments, thecountry is headed for an infrastructure-led national financial and economiccrisis, which is likely also to be a crisis for the international economy.China's infrastructure investment model is not one to follow for othercountries but one to avoid.

Does Infrastructure Investment Lead to Economic Growth or Economic Fragility? Evidence from China