China try­ing to re­vive growth with in­fra­struc­ture spend­ing

Kuwait Times - - BUSINESS -

HONG KONG: Lo­cal of­fi­cials in China are dither­ing over project ap­provals and busi­ness deals, some to avoid the spot­light of an an­ti­cor­rup­tion cam­paign, im­ped­ing Beijing’s plans to use in­fra­struc­ture spend­ing to ar­rest slow­ing eco­nomic growth. Though the Na­tional De­vel­op­ment and Re­form Com­mis­sion (NDRC) ap­proved 1.9 tril­lion yuan ($300 bil­lion) of in­vest­ment projects in the first 10 months of 2015, the coun­try’s top au­di­tor es­ti­mates $45 bil­lion of projects are be­hind sched­ule, in­clud­ing a rail­way line in Yun­nan de­layed five years by of­fi­cial sloth.

Provin­cial and city of­fi­cials were once in the van­guard of China’s break­neck ex­pan­sion, and they didn’t al­ways play by the rules for pro­cure­ment or when award­ing con­tracts or rights for land use. Now, when cen­tral gov­ern­ment is try­ing to lift growth from 25-year lows, they fear draw­ing at­ten­tion to them­selves in case their past comes back to bite them.

China has stepped up in­spec­tion and au­dit­ing of big projects to curb graft since late 2012, when Pres­i­dent Xi Jin­ping de­clared war on cor­rup­tion, vow­ing to go af­ter pow­er­ful “tigers” and lowly “flies”.

“Many peo­ple fear that the more they do, the more likely they will get into trou­ble,” said an of­fi­cial in southern Jiangxi prov­ince, who re­quested anonymity. “Lo­cal of­fi­cials are not fully im­ple­ment­ing the cen­tral gov­ern­ment’s pol­icy mea­sures,” said the of­fi­cial. Pros­e­cu­tors in­ves­ti­gated 4,040 civil ser­vants at the county level or above in 2014, an av­er­age of 11 a day, par­lia­ment was told in March.

But keep­ing their heads down is also get­ting them into trou­ble. State me­dia re­ported in Septem­ber that nearly 250 of­fi­cials had been pun­ished for fail­ing to spend gov­ern­ment funds, de­lay­ing projects or sit­ting on land ear­marked for de­vel­op­ment. Premier Li Ke­qiang has re­peat­edly scolded pro­cras­ti­nat­ing of­fi­cials for lazi­ness. Lo­cal me­dia said he pounded the ta­ble as he blasted of­fi­cials for in­er­tia at a meet­ing last year.

CAR­ROT AND STICK

Li has since been try­ing a lit­tle car­rot to go with the stick, promis­ing to pro­mote “up­right” of­fi­cials while sack­ing crooked ones, and give them a bit more rope to do the right thing.

“We should give lo­cal au­thor­i­ties more au­ton­omy in making de­ci­sions and give more sup­port for lo­cal of­fi­cials who are will­ing and ca­pa­ble of do­ing things,” Li told provin­cial of­fi­cials dur­ing a meet­ing in Oc­to­ber. In the first 10 months of the year, lo­cal ret­i­cence has con­trib­uted to a slow­ing of an­nual growth in fixed-as­set in­vest­ment to 10.2 per­cent, the weak­est pace since 2000, de­spite the NDRC’s quick­en­ing of project ap­provals.

Low re­turns and the lack of le­gal pro­tec­tion have ham­pered Beijing’s ef­forts to lure pri­vate in­vest­ment into in­fra­struc­ture projects, adding pres­sure on the gov­ern­ment to spend more.

“It will be very dif­fi­cult to sta­bilise eco­nomic growth with­out lo­cal sup­port,” said a re­searcher with the NDRC. “The or­di­nary peo­ple wel­come the fight on cor­rup­tion, but this brings about side ef­fects as some of­fi­cials are not do­ing any­thing.”

Many growth-ob­sessed of­fi­cials have been caught in the cam­paign. Liu Zhi­jun, the for­mer rail­way min­is­ter nick­named “Great Leap Liu” for push­ing con­struc­tion of the world’s largest high-speed net­work, re­ceived a sus­pended death sen­tence in 2013 for cor­rup­tion and abuse of power. Lo­cal me­dia said a well­known busi­ness­woman, sen­tenced to 20 years, had helped Liu se­cure 49 mil­lion yuan in kick­backs for rail­way con­struc­tion con­tracts.

Xi looks de­ter­mined to sus­tain the anti­graft drive, promis­ing in­sti­tu­tional re­forms and sys­tem build­ing so of­fi­cials “will not dare and can­not af­ford to be cor­rupt”.

The anti-cor­rup­tion cam­paign is not the only rea­son of­fi­cials are drag­ging their feet. Prov­inces and cities are groan­ing un­der 24 tril­lion yuan in debt, equiv­a­lent to al­most two-fifths of GDP, af­ter re­spond­ing to Beijing’s last big stim­u­lus push dur­ing the global fi­nan­cial cri­sis in 2008-09. Eco­nomic growth slowed to an an­nual 6.9 per­cent in the third quar­ter, and many an­a­lysts ex­pect it to slow fur­ther. — Reuters

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