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National security is front and centre in China’s vast new economy-boosting infrastructure investment plan that analysts say is motivated in large part by a rapid deterioration in domestic conditions and the overseas environment.
The top-level plan, unveiled on Tuesday, is also being viewed as a departure from last year, when Beijing underscored the importance of financial risk controls.
“We must strengthen the construction of national-security-related infrastructure to improve our capacity to deal with extreme conditions,” said the transcript of the meeting of the Central Financial and Economic Affairs Commission, which President Xi Jinping presided over on Tuesday.
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This preceded a Politburo meeting that is expected to be held in the coming days to lay out priorities in an effort to tackle risks stemming from coronavirus lockdowns and geopolitical tensions following Russia’s invasion of Ukraine.
While acknowledging that the nation’s existing infrastructure does not sufficiently meet demand, the commission called for an appropriate front-loading of construction and financing support.
“Development and security must be well-coordinated,” the meeting transcript said, pointing to the need to better forecast risks while also creating contingency plans that are “workable and effective”.
The commission also identified new and advanced types of technological infrastructure that are of paramount importance, including supercomputing, cloud computing, artificial intelligence and broadband internet access.
“We have seen dramatically increased difficulties, both in security and the economy, since February 24,” said Shi Yinhong, a professor of international relations at Renmin University, referencing the day Russia invaded Ukraine. “The worsening external situation makes stabilising the domestic economy more urgent.”
Sanctions … pose existential and economic risks to a nation. We need to pay attention to this
Fu Qianshao, retired military specialist
Fu Qianshao, a retired equipment specialist with the People’s Liberation Army Air Force, said the Western sanctions against Russia sounded an alarm to China on the importance of beefing up security across the board.
“Those sanctions have included finance, economy, internet and electronic products, and they pose existential and economic risks to a nation,” Fu said. “We need to pay attention to this.”
And while physical, or “hard”, infrastructure such as roads and ports are important for both civilian and military uses, Fu said China also must step up its construction of “soft” infrastructure, such as that pertaining to the internet.
Additionally, the commission vowed to improve crude and natural gas pipelines, power grids, farmland and water-conservancy projects, as energy and food security are increasingly being prioritised by policymakers.
Meanwhile, disaster-relief infrastructure, public health facilities and cold-chain logistics were also laid on the table.
“Those are key industries to the national economy and social development. Their construction will help boost the establishment of a modern industrial system, improve international competitiveness, tackle technological bottlenecks and safeguard national security,” Zhu Qigui, a professor with the Shanghai Advanced Institute of Finance, was quoted as saying by state media.
The world’s second-largest economy has been stepping up its assessment of national security by putting more emphasis on data usage, computer chips, seeds and energy self-sufficiency, in light of what Xi said were “great changes unseen in a century”.
We need to assess those [infrastructure investment] projects with caution
Shi Yinhong, Renmin University
Everbright Securities analysts Sun Weifeng and Feng Mengqian said the conference elevated the significance of infrastructure investment in China “from an economic support tool expected by the market to national security and a strategy of promoting domestic and international circulations”.
And this, they said, “confirmed the top leadership’s determination to enhance infrastructure investment”.
But Professor Shi said the infrastructure investment push could be impeded by China’s handling of the pandemic, as well as the geopolitical situation.
“We need to assess those projects with caution,” Shi said.
Even though China’s gross domestic product (GDP) grew by 4.8 per cent in the first quarter, the economic outlook took a big hit in March as the nation’s zero-Covid strategy severely disrupted economic activities in Shanghai and other major cities.
As a result, several analysts and international organisations have slashed their China GDP growth forecast for this year, with some expecting it to be between 4 and 4.5 per cent – well below the government’s target of “around 5.5 per cent”.
Fixed-asset investment is an often-used tool to boost the economy, as was seen in 2009 and 2010 following the global financial crisis, when China put considerable resources into constructing the world’s largest high-speed-rail and expressway networks.
However, this helped contributed to soaring property prices and resulted in local governments racking up debt in the tens of trillions of yuan.
It has also made Beijing extremely reluctant about launching another all-out stimulus amid the pandemic.
Investments contributed 1.1 percentage points to last year’s GDP growth of 8.1 per cent, compared with 1.7 percentage points from net exports and 5.3 percentage points from consumption, according to the National Bureau of Statistics.
Infrastructure spending, which often accounts for one-third of all investment, rose in the first quarter by 10.5 per cent, year on year, while property investment remained subdued with a growth rate of 0.7 per cent in the period.
The National Development and Reform Commission said on Wednesday that the number of new projects in the first quarter was 12,000 more than a year prior, and their combined investment was 54.9 per cent higher.
Additional reporting by Amber Wang
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