The images from China are stark. A bridge, buckling under forces we can only speculate about, collapses into a swollen river. A car is swept away.
The human cost is still being tallied, but the financial and economic implications are already being priced in by markets from London to Singapore. For those of us who spend our days staring at bond yields and risk premiums, this is not merely a tragedy. It is a signal.
A warning flare fired across the bow of every infrastructure investor, every public works department, and every government that has kicked the can down the road on maintenance and resilience. The bridge in question, part of China's vast transportation network, was likely carrying traffic that should have been safe. But nature, and time, have a way of exposing the cracks in our collective balance sheet.
The immediate market reaction will be to reassess risk in Chinese infrastructure bonds. Expect spreads to widen on local government financing vehicles. But the contagion will spread further.
Global investors will demand higher premiums for any infrastructure project in regions prone to extreme weather, which is most of them. The era of cheap money for big concrete projects is already fading. This event will accelerate that trend.
Central banks, already wrestling with inflation and the spectre of higher for longer interest rates, will take note. Fiscal authorities will face renewed pressure to justify spending on new projects when existing assets are crumbling. The car swept away is a metaphor for the capital that will now flee any asset class perceived as brittle.
The bottom line: infrastructure spending is going to get more expensive, and more selective. The days of assuming bridges and roads are safe are over. That assumption was always a fiction, propped up by decades of low interest rates and benign weather.
Now the fiction is collapsing, much like the bridge itself. For investors, the calculus is simple: pay now to maintain and harden, or pay much more later when the market forces you to. The tragedy in China is a global lesson.
The question is whether governments and investors will learn it before the next bridge falls.
