17 September 2019

What the Bohai Strait tunnel tells investors about China's growth ambitions.

The Bohai Strait tunnel, which will connect the port cities of Dalian on the northern rustbelt and Yantai, on the eastern-shoreline, is China’s most ambitious infrastructure project to-date. First proposed in 1992 by the deputy mayor of Yantai, the tunnel has been at the centre of much discussion, criticism and awe. The tunnel itself, if successfully completed, will be an incredible feat of both engineering, and Chinese will. Perhaps more important though, is what the tunnel tells investors about the Chinese mindset towards economic growth.

First spoken of 27 years ago, the Bohai Strait tunnel will be 123 kilometres (75 miles) long and will reduce the travel time between Dalian and Yantai from over 10 hours to less than one hour. The impressive, and endlessly challenging element of the project, is that 90km (56 miles) of the tunnel will be below the seabed. This makes the undersea section of the tunnel longer than the combined length of the two longest current submarine tunnels, the Channel tunnel and the Seikan tunnel.

The feat of engineering required to bring the tunnel to life is as significant as it is impressive. The real significance though, lies in what the very idea of the tunnel, nevermind the determination to complete it, tells us about the mindset of the Chinese.

The inherent engineering complexities of building the Bohai tunnel, and the multitude of uncontrollable factors that cannot be accurately predicted or planned for, are not the only causes for concern. The tunnel will run through two major fault zones which were the cause of earthquakes in 1969 and 1976 that measured 7.4 and 7.8 on the Richter scale respectively. Building the tunnel will also require that construction is performed on various islands of the Changshan Archipelago, the environmental impact of which is still unknown. Currently a candidate for the status of national marine park due to its biodiversity, construction of the Bohai tunnel will most likely have a negative impact on the surrounding environment.

Risks of the tunnel aside, the project comes with a projected price tag of over US$40 billion. This is only a projection though and a development as complex as the Bohai Strait tunnel, with so many unpredictable factors, will likely experience both time delays, as well as budget overruns. The Hangzhou Bay Bridge, a far less complex project, cost the Chinese 20 billion yuan, as opposed to the 11.8 billion yuan that was expected.

Perhaps the most revealing insight into the minds of the Chinese, is the fact that construction hasn’t even started on the Bohai Strait tunnel and they’re already talking about an even larger and more complex submarine project: a tunnel connecting mainland China to Taiwan. Whilst some nations would consider the Bohai Strait tunnel to be an impossibility, the Chinese appear to see it as a stepping stone to ever larger and more ambitious projects.

The Bohai Strait tunnel isn’t just an infrastructure development project. It’s a clear signal to the rest of the world that China will go to extraordinary lengths, in the face of great risk, financial outlay and time investment, to continue its ascent to global economic leadership. It’s a signal that the current economic slow-down is nothing but a small crease in what the Chinese envision to be their legacy of economic dominance. It’s a clear signal that investment in the Chinese growth story is still as lucrative as it was 10 years ago.