In Depth: Canal Fever Grips China Amid Slowing Growth

China is currently undergoing a transformation with its ambitious canal projects, as the government intensifies efforts to expand its inland waterways network to stimulate trade and economic growth [para. 1]. At least five major canal projects, along with other notable ventures, are in progress or planned, with a cumulative financial outlay exceeding 850 billion yuan ($117 billion) [para. 2][para. 3]. These initiatives form part of a long-standing strategy initiated about two decades ago to foster a "high-class" inland waterway transport (IWT) network, aimed at enhancing the efficiency and capacity of inland navigation [para. 4].

The extensive canal developments include significant projects such as the 135-kilometer Pinglu Canal and the 1,988-kilometer Zhejiang-Jiangxi-Guangdong north-south waterway system [para. 2]. The Pinglu Canal is particularly vital, connecting for the first time a river to the sea since the establishment of the People’s Republic of China [para. 2]. Furthermore, the Henan provincial project plans on linking key river systems, marking a crucial step in enhancing the transport connectivity [para. 3][para. 4].

China's inland waterway network, the longest globally, spans approximately 128,000 kilometers. It includes the significant Yangtze River, which comprises about half of this total length [para. 5]. However, a considerable portion of these waterways is not yet accessible to larger vessels, underscoring the importance of this ongoing canal expansion strategy [para. 5]. The government is keen on redirecting freight from road to water transport, which according to experts, can offer substantial economic and environmental benefits by reducing pollution and cutting transport costs [para. 6][para. 8].

Despite the strategic importance of these projects, inland waterways have historically been overshadowed by substantial investments in roads and railways. A paradigm shift occurred in 2007 when China initiated a national development plan for inland waterways and ports through 2020. This set out ambitious goals, such as expanding high-class waterway lengths and connecting significant urban centers [para. 7]. Building on this, in 2019, a long-term vision was unveiled to further cement China's stature as a transportation powerhouse by 2035, emphasizing the proliferation of navigable waterways and further infrastructural modernization [para. 8].

However, the initiatives have lagged behind other infrastructures, such as highways and railroads, with only minor growth in navigable inland waterways over the years. As of 2023, investment in waterways was substantially lower compared to roads and rail infrastructure [para. 9]. Nevertheless, the potential economic benefits alongside environmental goals encourage the concerted push towards developing these waterways [para. 8][para. 10].

Local governments are also actively participating in canal projects to invigorate their regional economies, especially given the maturation of road networks which offer less room for expansion [para. 11]. Besides, substantial projects like the Pinglu Canal support China's trade corridors, promising significant reductions in shipping distances [para. 14]. Provinces are also looking into boosting their internal trade and logistics through these waterways, thus directly impacting various industries [para. 15].

This fervent investment in waterways isn't without its challenges. Analysts question the financial viability of these projects given local governments' strained finances and potential environmental impacts [para. 16][para. 18]. Despite the availability of funds from central and multilateral sources, ensuring robust returns from canal projects remains a challenge [para. 19]. Additionally, post-construction sustainability and cost-covering revenues also pose significant issues [para. 25][para. 27].

Overall, while China’s expansive canal projects represent a massive stride towards integrating inland waterways into its broader transport network, ensuring financial sustainability and maximizing environmental benefits will be crucial for their long-term success [para. 20][para. 28].