Beijing is trumpeting the urgency of its infrastructure construction push, as leaders admit that stabilising the national economy in the first half of this year will be an uphill battle.
The fresh calls for increased consumption and more effective investment came as the world’s second-largest economy is facing new downward pressure, with the spread of Delta and Omicron coronavirus variants in major cities.
“Our economic operations are now at the key stage of surmounting obstacles,” said a statement that followed the State Council meeting chaired by Premier Li Keqiang on Monday. “We must put growth stabilisation in a more prominent position, and firmly implement the strategy of domestic demand expansion.”
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China’s cabinet has moved to quicken the pace of 102 major projects outlined in its 2021-25 development plan. Key areas were identified as those concerning food and energy security; advanced manufacturing and hi-tech industries; and affordable housing. Others include infrastructure developments, such as those in support of transport, logistics and telecommunications.
“Obviously, the service sector can hardly see a quick recovery amid scattered pandemic outbreaks,” said Raymond Yeung, chief Greater China economist at ANZ Bank.
These outbreaks have spread in places such as Tianjin, the nation’s 11th-largest city economy; Xian, the 23rd-largest; and Zhengzhou, the 16th-largest. Subsequent lockdowns and mass-testing efforts have limited mobility and consumption.
ANZ estimated that China’s fourth-quarter gross domestic product (GDP) growth could fall to 3.6 per cent from 4.9 per cent in the third quarter, while the country’s 2022 GDP growth could fall to 4.6 per cent – down from projected 2021 growth of 8 per cent.
“There will certainly be a marginal improvement in infrastructure investment. But its multiplier effect is not as big as others. More supportive measures are needed,” Yeung said.
Chinese authorities are widely believed to have set their sights on a national GDP growth rate of at least 5 per cent for this year, as economic and social stability are especially important to the Communist Party in the lead-up to its twice-a-decade National Congress.
For their part, domestic analysts have expressed cautious optimism, noting that policymakers still have a number of tools at their disposal.
“The government’s economic-stabilisation intentions have been unfolding since a Politburo meeting in July, but its determination to make the best use of infrastructure construction [to achieve that goal] is unprecedentedly high,” China Securities economist Huang Wentao wrote in a note on Tuesday.
In the past, building more expressways, railways and airports was often seen as a way to stabilise China’s economy. But such efforts resulted in a sharp uptick in local government liabilities amid unregulated spending sprees.
Beijing has taken steps to prevent the expansion of implicit debts and has advocated for the construction of “new infrastructure” – mainly related to 5G, ultra-high-voltage power transmission, big data centres, industrial internet and artificial intelligence.
Infrastructure investment grew by 0.5 per cent in the first 11 months of last year, much lower than 11.2 per cent rise in industrial investment, 6 per cent growth rate for property investments, and 5.2 per cent increase in overall fixed-asset investments, government data showed.
Authorities on Monday also vowed to simplify the approval procedures for new investment projects.
After the Ministry of Finance allocated 1.2 trillion yuan (US$188 billion) worth of special-purpose bonds last month, Beijing’s policymakers urged local authorities to issue those bonds as quickly as possible to fund construction projects and to leverage private investment to yield results in the first quarter.
“Now that the horn of economic stabilisation has been blown, infrastructure construction will speed up,” said Huang, who expects there will be at least a 6 per cent rise in such projects this quarter.
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