China said to speed up $1 trillion in projects to spur economy3 min read . Updated: 07 Jan 2015, 01:23 AM IST
Premier Li Keqiang's govt approves projects as part of a broader 10 trillion yuan plan set to run through 2016
Beijing: China is accelerating 300 infrastructure projects valued at 7 trillion yuan ($1.1 trillion) this year as policymakers seek to shore up growth that’s in danger of slipping below 7%.
Premier Li Keqiang’s government approved the projects as part of a broader 400-venture, 10 trillion yuan plan to run from late 2014 through 2016, said people familiar with the matter who asked not to be identified as the decision wasn’t public.
The National Development and Reform Commission (NDRC), which will oversee the projects, didn’t respond to a faxed request for comment.
The move illustrates concern among officials that China’s planned shift to a domestic-consumption driven economy has yet to produce enough growth momentum.
The yuan rose, halting a two-day decline, and Australia’s dollar—a proxy for China due to its shipments of iron ore and other commodities used in construction—climbed after the news. “It’s part of China’s efforts to stabilize growth, and the news will help to boost market confidence," said Julia Wang, a Hong Kong-based economist with HSBC Holdings Plc.
The Shanghai Composite Index pared a loss of as much as 1.4% to close little changed. The MSCI Asia Pacific Index lost 1.7%.
The approvals contrast with past moves to boost growth via infrastructure in which the government gave the green-light to projects individually. They are part of efforts to respond to weak output, according to the people.
The projects will be funded by the central and local governments, state-owned firms, loans and the private sector, said the people. The investment will be in seven industries including oil and gas pipelines, health, clean energy, transportation and mining, according to the people.
They said NDRC is also studying projects in other industries in case the government needs to provide more support for growth.
The NDRC’s spokesman, Li Pumin, said last month China would encourage investment in those areas.
The Economic Observer newspaper reported 26 December on its website that an official from NDRC’s Zhejiang provincial bureau said the government had approved more than 420 projects needing investment of more than 10 trillion yuan, without specifying a timeframe.
Rail investments may exceed 1.1 trillion yuan this year as investments in the previous four years lagged behind the five- year plan for 2011-2015, Han Siyi, an analyst at Shenyin and Wanguo Securities, said at a conference in Shanghai on Tuesday.
China has sought ways to stimulate growth without resorting to a full-blown stimulus as it seeks to keep a lid on total debt that is now more than 200% of gross domestic product.
The central bank added liquidity into the banking system last year and announced an interest-rate cut on 21 November.
“It’s not 2008 again," Zhao Xijun, a finance professor with Renmin University of China in Beijing, said in reference to a 4 trillion yuan stimulus China unleashed at that time. “When China launched the big stimulus package in 2008 to deal with the global financial crisis, China wanted nothing but faster growth; now China is focusing more on quality, efficiency and sustainability."
China’s total fixed-asset investment in the first 11 months of the year was 45.1 trillion yuan. Infrastructure spending totalled 9.8 trillion yuan in transportation; environment and water management; and the supply of heat, gas and water, according to National Bureau of Statistics data compiled by Bloomberg.
Deutsche Bank AG analysts have cut expansion projections for this quarter to 6.8%, reinforcing their call for the central bank to step up monetary stimulus.
“We expect growth to surprise to the downside in Q1 and policies to surprise on the loose side in 2015," Deutsche Bank economists led by Hong Kong-based Zhang Zhiwei wrote.
China will be hit by a “double whammy" of slowing property investment and a sharp decline in land sales by local governments, the analysts wrote. Bloomberg
Kevin Hamlin, Xiaoqing Pi and Xin Zhou in Beijing contributed to this story.