BEIJING: China wasted an approximate 42 trillion yuan ($6.9tr) on “ineffective investment” in the five years from 2009, with the problem worsening in the past two years, a government official and an economist were quoted as saying in the local media.

From relying too much on investment to lift the economy to supplying state firms with cheap loans that fuelled unnecessary spending, the two pressed China to face up to its problem of making investment with low or no efficiency.

Their calculations — one of the starkest to date — showed that unproductive investment took up almost half of China’s total investment in 2009 and 2013.

The remarks were made by Xu Ce of the development and planning department at China’s top economic planner, the National Development and Reform Commission, and Wang Yuan from the Academy of Macro Economic Research, which is linked to the commission.

Their comments were published in an opinion piece in the Shanghai Securities News on Thursday, with the caveat that their views did not reflect official thinking.

“The problem of low- or no-efficiency investment has reached a time where it must be faced up to,” Xu and Wang wrote.

China has acknowledged that it is overly-dependent on investment to power the world’s second-biggest economy, but re-ordering the growth model takes time. Investment contributed to 42 per cent of China’s economic growth between January and September this year.

Xu and Wang said the problem should be addressed now as China seeks to develop regional economies, including those along the old Silk Road trading route where it has promised to spend $40 billion.

Exhorting caution, Xu and Wang said China wasted between 4.7tr yuan and 13.2tr yuan each year between 2009 and 2013 on investment with zero efficiency.

The money wasted on such projects peaked in 2013 at 13.2tr yuan, or 47pc of China’s total fixed capital formation for that year, their calculations showed.

Investment quality had fallen so much recently that nearly two-thirds of the 67tr yuan that China wasted from 1997 were spent after 2008.

Easy liquidity conditions worldwide, state campaigns to revitalise some sectors that led to over-investment, delays in the restructuring of some firms and judging government performances by the level of economic growth all fed wastage, they said.

Published in Dawn, November 21th, 2014