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China Must Hasten Infrastructure Investment to Stabilize Growth
World Economy

China Must Hasten Infrastructure Investment to Stabilize Growth

Increased infrastructure investment is key to stabilizing China’s economic growth, a top state advisor said on Sunday, while calling on the central bank to lower the cost of financing for companies and increase overall credit, Reuters wrote.
“Keeping relatively high growth of infrastructure investment is key to stabilizing economic growth” since property and manufacturing investment remains weak, said Yu Bin, head of the micro economy research department at the State Council’s Development Research Centre.
China needs to speed up its 172 hydropower projects, develop 800 million mu (53 million hectares) of high-standard agricultural land and increase investment in rural roads, Yu said.
Yu’s comments come a day before the Chinese government is due to release third-quarter gross domestic product growth figures, and were published in the government-owned Economic Daily on Sunday.
Many economists expect China to report that July-Sept economic growth dropped below 7% for the first time since the global financial crisis.
Premier Li Keqiang said on Saturday that with the global economic recovery losing steam, achieving domestic growth of around 7% is “not easy”.
President Xi Jinping also acknowledged “concerns about the Chinese economy” but sought to allay them in a written interview with Reuters.
The Chinese government has taken several measures in recent months to accelerate construction investment, in part by attracting private financing through the increased used of public-private partnerships (PPP).
The ministry of finance in September published details for 206 proposed PPP projects, worth a total value of 659 billion yuan ($104 billion), including an expressway in Beijing.
MOF last month also launched a 180 billion yuan fund with China’s biggest banks and financial institutions to invest in PPP projects.
Yu also called for the central bank to be alert to macro-economic adjustments lowering the cost of finance for companies and allow for credit growth, while maintaining a prudent monetary policy.
“Given the short-term rising downward pressure, it does not benefit China’s structural adjustment if economic growth is too slow or too fast,” he said.
China has already launched a wave of measures to drive economic growth since late 2014, including cutting benchmark interest rates five times since November and lowering the reserve requirement ratio for lenders.
Many economists expect the central bank to further cut interest rates and the reserve requirement ratio by year-end.
Yu also said China should implement fiscal, taxation and financial policies to encourage companies to merge and restructure, and allow bankruptcies to solve the problem of over capacity.

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