The West sees challenges from China in many industries. This is simply because China is reaping the rewards of increasing returns from many years of infrastructure building, learning by doing, and focusing on innovations to meet current needs.
Economists in the West have long preached the benefits of infrastructure and increasing returns. A report from Morgan Stanley (Jan 30, 2024) cited a long list of contributions by noted economists including Paul Krugman, Kenneth Arrow, Robert Solow, and W Brian Arthur and touted the benefits of cumulative investment and learning. The authors presented evidence that among the benefits is a rise in returns on investment capital and market share. Arrow, together with fellow economist David Aschauer, stressed the importance of infrastructure as an enabler of economic growth. But politicians in the West have not paid much attention to their advice. The result is that much of the United States’ infrastructure is in disrepair. The latest grade given by the American Society of Civil Engineers (ASCE) in its 2025 Report Card for America’s Infrastructure is “C”. Although there is a slight improvement from “C-” five years ago, the ASCE estimates that an additional $3.7 trillion is needed to bring infrastructure to a respectable condition.
China’s investment in infrastructure and innovations is one of the main reasons for its cost advantage and efficiency. China was able to build a new full-service hospital during the COVID-19 pandemic in just 10 days. Yet media in the West will not acknowledge China’s infrastructure prowess. The World Population Review’s latest infrastructure rating score for China is a 74.9, notably behind America’s 78.6. US News, in its 2026 Best Country Ranking, gave China an infrastructure score of 67.6, well below America’s 71.3. Their denial does not change facts. Today, China provides water, reliable electric power, and 5G coverage to the remotest parts of the country. China’s high-speed train network and efficient logistics system have lowered costs for households and businesses throughout the nation. China’s infrastructure is part of an ecosystem that supports and enables innovations, commerce, and consumption. It is also a key reason China was able to bring 800 million people out of extreme poverty in four decades, as a World Bank press release issued in 2022 announced.
Notwithstanding some very expensive luxury homes, for most people living in China, housing costs are affordable and so are healthcare, food, and clothing. Both inter-city and intra-city transportation is efficient and very affordable. Apart from free mandatory education for nine years, China is beginning to provide free pre-school education. All this enables China to afford much lower wage levels than Western countries.
Spillover effect is an aspect of increasing returns. Solar panels were invented for power generation. They are now helping to convert deserts into pastures for sheep and supporting other forms of agriculture. A 2025 report from the World Resources Institute says: “China’s technical potential for agrivoltaics exceeds 60,000 gigawatts under the dual land-use principle. Crop-cultivation systems hold the largest share (40,000 GW), mainly located in resource-rich western regions, while other types such as photovoltaic grazing, aquavoltaics, and solar greenhouses demonstrate distinct spatial and functional advantages, supporting diversified development strategies.”
The West should face reality. China stands tall in manufacturing and agriculture not because of “excess capacity”, but because its government understands infrastructure and increasing returns and lives up to that understanding
Many people call China the “factory of the world”. Most do not realize that it is also the planet’s top agricultural producer. China has much less arable land compared to the US, but its agricultural output is now three times that of America. According to World Population Review (citing World Bank data), China has 108 million hectares of arable land, compared to America’s 152 million. According to Worldostats, China’s 2025 agricultural production, which is valued at $1.654 trillion, tops the world, while the US’ agricultural output is $0.474 trillion, behind second-placed India with $0.524 trillion.
China is innovating very fast today because it has great infrastructure and many top education and research institutions which produce large numbers of scientists, engineers, and entrepreneurs every year. Innovations often cross boundaries and their effects go well beyond their original purpose. Dan Wang’s highly acclaimed 2025 book: Breakneck: China’s Quest to Engineer the Future offers very good insights into China’s cost advantage, which stems from a vision-driven engineering approach. Wang notes that whereas in America many rural areas are barely covered by 3G or even 2G networks, China avails 5G connectivity to the remotest rural areas in the mountains. Guizhou used to be one of the poorest provinces in China. In 2025, its growth rate was 4.9 percent, which is close to the national average. It is now home to many data centers and advanced manufacturing including electric vehicles and batteries. It is also home to the Huajiang Grand Canyon Bridge, soaring 625 meters above the Beipan River in the province’s mountainous terrain, is nearly nine times as tall as San Francisco’s Golden Gate Bridge. It opened in 2025 after three years of construction that slashed travel time across a deep canyon from two hours to two minutes.
China’s infrastructure, both hard infrastructure like bridges, ports, and high-speed railway lines, and its soft infrastructure like the rule of law and the political system that centralizes leadership while safeguarding against power abuses and ensuring social and political stability, have reduced costs for businesses and households, and greatly lent a hand to innovation.
The West should face reality. China stands tall in manufacturing and agriculture not because of “excess capacity”, but because its government understands infrastructure and increasing returns and lives up to that understanding.
The author is an honorary research fellow at the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University, and an adjunct professor at the Academy for Applied Policy Studies and Education Futures, the Education University of Hong Kong.
The views do not necessarily reflect those of China Daily.
