Italy Joins China's New Silk Road Project

The belt and road initiative is actually a response to the failure of Chinese central planning. So much of China's economy is specialized in construction at this point that they can't risk the mass unemployment that would result from popping the construction bubble, so instead they're doing everything they can--building high speed trains to nowhere, building infrastructure in other countries, building entire cities that nobody lives in--to keep the ball rolling.

Also, infrastructure does not lead to economic growth. Quite the other way around, really.

It's a sliding scale of return. If your infrastructure is already decent, you will see a terrible return on your investment, as in the case of Japan's debacle of decades of infrastructure investment that produced negative real growth (due to the debt vs growth generated).

If you're China in 1980 or 1990 (ie third world infrastructure), vast infrastructure spend will faciliate your decades-long growth explosion. Without that, you can't become China of 2019, you can't actually go from a $400b economy to a $14t economy. The ports, roads, rail, bridges, utilities, energy generation, et al. is a requirement and produces extraordinary returns in a context like that. It drastically boosts economic productivity and raises your maximum output potential by a lot.

As another recently discussed (on HN) example, Romania has had one of the world's fastest growing economies in recent years. Economically it's attempting to push into a solid middle-tier economic nation, in the footsteps of countries like Poland, Chile or Slovakia. Romania simultaneously has a horribly lagging roads network that is in desperate need of expansion and improvement. It's very likely that properly building out their roads infrastructure would help facilitate their economic boom continuing; and that not doing so, would act as a serious point of friction on growth long-term. You can't get to $25k GDP per capita, with roads built for a $2k GDP per capita economy.

It does to a certain point, but then you run into diminishing returns. China needed to build infrastructure in the 80's and 90's because a lack of infrastructure was a bottleneck for further economic growth. Now they're building infrastructure primarily as a means of exerting political power (e.g. integrating western China with high speed rail and Belt and Road).

China's mistake is actually a shining example of the failures of a centrally planned economy. Any reasonably competent person would know that China had to build infrastructure in 1980 and would have probably made similar economic planning decisions that the Chinese did. But even they are stuck in an infrastructure construction bubble in 2020 to the point that it's easier to waste resources building unnecessary infrastructure than to try to reallocate labor and capital and natural resources.

(See also: Stalinist industrialization. It was easier for central planners to focus on the hypothetical exponential impacts of "building machine tools to build machine tools", or to focus on building as many T-34 tanks as possible, than to actually design a self-sufficient war economy, which they never really had--there was a very strong reliance on imports of Allied food, radios, and other small goods.)