China To Spend $126 Billion On New Railway Projects
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China’s National Development and Reform Commission (NDRC), the nation’s top economic planning agency, has approved the construction of 25 new railway projects that will cost more than $126 billion over the next eight years and, more importantly, boost infrastructure investments to stabilise economic growth, reported the China Daily on Thursday.
China’s National Development and Reform Commission (NDRC), the nation’s top economic planning agency, has approved the construction of 25 new railway projects that will cost more than $126 billion over the next eight years and, more importantly, boost infrastructure investments to stabilise economic growth, reported the China Daily on Thursday.
The projects, according to the NRDC, will “inject vitality into the country’s slowing economy and improve the investment environment”; though some economists warned that if they end up as low-efficiency investments, the amount spent may add to the nation’s bad-debt.
[quote]”If the upgraded infrastructure and environment cannot attract more investment and tax revenue from enterprises, the investment is likely to turn into bad debt,” told Sun Lijian, a senior economist at Fudan University in Shanghai, to the state-owned paper.[/quote]Related: China’s Unruly Debt Woes: Michael Pettis
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Related: How China Can Address Its Economic Challenges By 2030: Justin Yifu LinStill, the NRDC intends to go ahead with its plan, which will boost the number of Chinese cities with urban railway systems to 40 by 2020.
About $110 billion will be spent on 23 inner-city urban railways including those in Shijiazhuang, Taiyuan, Lanzhou, Guangzhou and Xiamen, while the remaining sum is expected to go into two inter-city rail line projects.
The NRDC say that local governments will be the major investors in these projects, though state-owned banks are likely to provide loans as well.
Last month, the latest data from China’s official statistics agency showed that the Chinese economy had slowed to 7.6 percent growth from April to June, the slowest pace in three years.
According to Chinese media reports, the investment in stimulus packages announced by provincial and city governments may add up to more than 10 trillion yuan ($1.5 trillion) to the economy over the next few years.
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HSBC added in a note on Thursday that the latest round of investments, equivalent to about 1.7 percent of gross domestic product, will boost infrastructure investment growth to 20 percent annualized in the coming months, up from 15 percent currently.
[quote]“Beijing is stepping up efforts to speed up infrastructure investment to hold up growth,” HSBC said, as cited by MarketWatch. “We expect a fast filtering-through process to help generate a modest growth recovery in fourth quarter.”[/quote]
