China to invest in infrastructure to bolster growth: report

BEIJING Sun Apr 22, 2012 10:19pm EDT

A man walks past a construction site in Beijing's central business district April 13, 2012. REUTERS/Jason Lee

A man walks past a construction site in Beijing's central business district April 13, 2012.

Credit: Reuters/Jason Lee

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BEIJING (Reuters) - China is set to speed up spending on roads, railways and utilities to boost economic growth, the official China Securities Journal said on Monday, citing government economists.

The increased fiscal spending on infrastructure, which has already started, will fall within Beijing's framework of policy "fine-tuning" instead of another massive stimulus like the one Beijing launched at the end of 2008.

Zhang Hanya, the head of China's investment association, a think tank affiliated with China's economic planning agency, was quoted as saying that boosting investment is the only choice for Beijing to bolster growth since consumption is always stable and exports are meeting overseas demands.

Spending on roads, bridges, subways and airports will boom as investments in industrial facilities will worsen overcapacity and more property investments are discouraged by Beijing, Zhang said.

"China has to rely on infrastructure investment to manage economic slowdown," Zhang was quoted as saying.

China's economy grew at its weakest pace in nearly three years in the first quarter of 2012, with the annual rate of expansion slowing to 8.1 percent from 8.9 percent in the last quarter of 2011.

Investment, usually the chief engine for the world's No.2 economy, contributed only 2.7 percentage points of GDP growth in the first quarter.

The slowdown in capital spending has caused pain for some sectors. China's steel industry made combined losses in the first quarter -- the first time in the new century.

Fan Jianping, a researcher with the State Information Centre, was quoted as saying infrastructure investment would become the focus for Beijing in the second quarter to keep the economy from cooling too much.

China's National Development and Reform Commission has speeded up its approval process for local infrastructure projects, the newspaper reported.

The Ministry of Finance has accelerated fiscal spending. In March alone, fiscal expenditures jumped 34.7 percent from a year ago to 1.02 trillion yuan, exceeding the month's revenues of 905.8 billion yuan.

Zhou Xiaochuan, the People's Bank of China governor, said in a statement at the weekend China would try to maintain "robust, sustainable and balanced growth".

The investment association's Zhang said the central bank has to cut the required reserve ratio by another 5.5 percentage points to keep sufficient liquidity for investment and economic activities.

"A level of 15 percent of (required reserve ratio) will be ideal," Zhang said. The level is currently at 20.5 percent for major lenders.

(Reporting by Zhou Xin and Nick Edwards; Editing by Paul Tait)

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Comments (3)
Andao wrote:
LOLOL, wow. The last thing China needs is more bridges to nowhere and abandoned airports.

Have fun with servicing that debt!

Apr 23, 2012 4:50am EDT  --  Report as abuse
HowardXue wrote:
To Andao,
There are still big deficits in infrastructure in China everywhere, if people visit China and go outside big cities.

Apr 23, 2012 12:47pm EDT  --  Report as abuse
zhubajie wrote:
China still has a long way to go re infrastructure construction. Not only is infrastructure growth good for the economy, it also guarantees decades of continued growth.

Compared to the U.S., much more needs to be done in China:

China America
Population 1.34B 313M (July 2011)

Electricity Gen. 3.4 TkWh 4.1 TkWh (2008 est.)
Airports 502 15,079
Pipeline(gas/oil/other) 75,742 km 793,285 km
Railways 86,000 km 224,792 km
Paved Roads 3.86MM km 4.37MM km

Moreover, I submit that infrastructure investments by Beijing are NOT haphazard, seat-of-the-pants reactions to a downturn, but rather part of a grand plan to continue China’s economic growth for the next few decades.

Today one gigantic area of growth for China is infrastructure building – not just in China, but all over the world. Chinese construction teams have a 30% cost advantage compared to Western contractors. The really deep bench – of having the world’s largest steel and cement industries, the largest shipbuilding yards (42% of world capacity), and huge and hugely successful heavy machinery makers such as Sany, all auger well for a continued explosive growth of the industry. It is not just a matter of costs – very often it is also a question of capacity. For the California Bay Bridge project, it was reported that no American bridge builder has the ability to build, transport and install the huge steel structures, and the job went to China.

This is getting to be the rule rather than the exception. So far as infrastructure projects are concerned: Difficult job? Big job? Jobs and nobody else know how to do? Jobs that require financing? Jobs the have to be done on time and under budget? Go see China.

AND the rewards are huge – the total worldwide infrastructure building market is probably around US$10 to $15 Trillion a year. Getting half of that market share would guarantee many more decades of growth.

More importantly, unlike high tech which can be risky and hires few, infrastructure building means MANY good paying jobs. Moreover, the vast experience portfolio in infrastructure building is driving innovations (e.g.. Broad Tech, 30 storey hotel built in 2 weeks), and in turn driving the growth of a tech class of skilled workers in China. The potential for export looks quite good. Imagine a parking structure kit – 6 stories, for 1,000 cars, that can be “built” in 2 weeks (OK, shipping from China probably takes a month) – AND, it can be dismantled and moved. Today only China has the technology, and can do it cheaper than local built-from-scratch.

Having and successfully executing plans for 34 years puts China in a good stead to continue another 35 years of sustained growth.

Apr 23, 2012 5:37pm EDT  --  Report as abuse
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