China Agrees US$157bn Package of Infrastructure Spending

China’s powerful economic planning body, the National Development and Reform Commission (NDRC), has authorised a total of 60 infrastructure projects worth more than US$150bn in an effort to boost the economy mired in the worst slowdown in three years.

Over the past two days, Beijing has announced plans to build highways, waterways, urban rail projects and waste water treatment plants, estimated to cost more than one trillion yuan, equivalent to US$157bn and around 2% of China’s total economy.

Although the Chinese government did not describe the investments as a stimulus package, analysts said the approvals signal a shift in policy. “Apart from the large sizes of the projects, the announcements were all made in two days, which is very intense,” said Zhang Zhiwei, economist at Nomura. “It signals a change in policy stance, which is now much more proactive.” He added that the projects are likely to begin in the coming months.

The announcement raised hopes that the Chinese economy may get a lift as early as Q412. Shares and steel futures jumped on the plans to build highways, ports and airport runways, which analysts say indicate growing intent to bolster economic growth as the country’s once-a-decade leadership change approaches. Chinese growth slowed to 7.6% in Q212, its lowest in three years, and more recent economic data suggests that the slowdown could be even steeper in Q3

The Chinese government has been expected to act to boost growth for some time, but has been wary of reinflating a property bubble and overstimulating the economy. It is thought the leadership has also been preoccupied with the once-in-a-decade contest taking place later this year.

Crucially, these new projects have been signed off by the central planning agency, meaning they are likely to proceed. Local governments in China have announced around seven trillion yuan worth of projects over the past two months but analysts said funding shortages would scupper the plans. Once projects have Beijing’s approval, however, funding is seen as a formality.


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