How China funds its infrastructure?

The Government of India spends $10 bn (Rs 5000 Cr) over three to five years on its flagship programs on urban development (JNNURM) and electricity distribution (R-APDRP). China spends about the same on some of its transport, resettlement or irrigation projects. So Indians used to seeing governments beating the trumpet about $10 bn infrastructure programs wonder where China gets the resources to finance these massive investments.

While the entire Indian fiscal stimulus was a mere $16 bn, the Chinese announced a whopping $586 bn (16% of GDP) stimulus, 75% of which is to be spend on infrastructure. Though the Planning Commission has estimated that India needs nearly $495 bn to finance infrastructure investments during the Twelfth Five Year Plan period (2007-12), annual spending on infrastructure has been in the range of $20-30 bn. The WSJ provides some indication of the source of Chinese funds

"Land sales by China’s local governments generated 1.59 trillion yuan (around $233 billion) last year, up more than 60% from a year earlier... Xinhua attributed the sharp gain in such government income to the surge in China’s real-estate prices in 2009... revenue from the sale of land targeted for property development accounted for 84% of the total for the year... Based on data from the Ministry of Land and Resources, land sale income accounts for at least half of local governments’ fiscal revenue... Many local governments are in such financial dire straits that they simply have to rely on windfalls from land sales as a lifeline to cover basic needs."

State governments in India like Andhra Pradesh and Rajasthan too have resorted to windfall incomes from land sales to fund various projects and even bridge their deficits. However, unlike China, these states are constrained by the availability of sufficient lands surrounding the major urban centers and by title disputes and resultant court litigation. Further, the bursting of the property bubble has dented their ability to raise the massive amounts required. And again unlike the Chinese, the State does not exercise the sort of power required to keep property prices artificially at a higher plateau.