BEIJING PINS HOPES ON BUILDING SPREE

State Council stresses need for growth stabilisation as it quickens pace of 102 infrastructure projects

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.

Fresh calls for increased consumption and more effective investment came as the world’s second-largest economy faces new downward pressure, with the Delta and Omicron coronavirus variants spreading in big 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.”

The 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.

“Obviously, the service sector can hardly see a quick recovery amid scattered pandemic outbreaks,” said Raymond Yeung, chief Greater China economist at ANZ Bank.

Outbreaks have spread in places such as Tianjin, Xian and Zhengzhou.

Subsequent lockdowns and testing have limited mobility and consumption.

Meanwhile, Beijing’s tough stance on the property sector, a former driver of economic growth, has reinforced market expectations for slower investment and sales following China Evergrande Group’s debt crisis.

ANZ estimated China’s fourth-quarter gross domestic product growth could fall to 3.6 per cent from 4.9 per cent in the third quarter, while its 2022 growth could drop to 4.6 per cent from the projected 2021 expansion 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.

Authorities are 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-adecade National Congress.

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 yesterday.

In the past, building more roads, 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 advocated for the construction of “new infrastructure” – mainly related to 5G, ultra-highvoltage 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 the 11.2 per cent rise in industrial investment, the 6 per cent growth in property investment and the 5.2 per cent increase in overall fixed-asset investments, government data showed.

Authorities also vowed to simplify the approval procedures for new investment projects.