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Free AccessMNI EXCLUSIVE: China Infrastructure Spending Seen Up In 2019
--Infrastructure Investment To Outpace 2018's 3.8%, But Fall Far Below 2017's
19%
--Planned LGSB Issuance Insufficient For Scheduled Infrastructure Investment
By Wanxia Lin
BEIJING (MNI) - Chinese infrastructure investment will pick up modestly
this year from the low levels seen in 2018, boosted by increased funding by
local government special bonds (LGSB), a senior government advisor told MNI
Wednesday, although another advisor said planned issuance will be insufficient
to support the needed expenditure.
Growth in investment will outpace the 3.8% seen last year, as
infrastructure projects are ramped up to boost the economy, but be far slower
than the 19% in 2017, said Bai Chong-en, Dean of the School of Economics and
Management at Tsinghua University.
Local authorities will this year be authorised to issue CNY2.15 trillion of
special bonds -- which are repaid by returns on projects they fund and do not
appear in headline central government accounts -- up from the CNY1.35 trillion
initially pencilled in for 2018, Premier Li Keqiang said on March 5. Actual
issuance last year eventually totalled CNY1.95 trillion and MNI understands the
government may allow additional quotas this year if demand is robust
Bai, a former member of the People's Bank of China Monetary Policy
Committee, said government-led infrastructure investment growth at the lower end
of the recent range is better for the overall economy, as it will help prevent
the allocation of resources away from the private sector, and avoid a return to
the 'old path' of stimulus-led growth.
--REAL DEMAND DRIVER
Bai emphasized the need for infrastructure investment to target areas with
real demand, rather than for projects to be carried out simply to stimulate
growth.
Different cities may have different needs, he noted. Some need better
public transportation, others sewage systems and investment decisions need to be
made at the local level, he said.
But Gao Peiyong, vice president of the Chinese Academy of Social Sciences,
said planned LGSB issuance will be insufficient to finance all the
infrastructure projects in the pipeline. "The special bonds quota was raised by
only CNY800 billion from last year, insufficient by far," he said.
China's regions have been left struggling to finance spending programmes as
the central government continues to crack down on their debt levels, cutting off
their access to alternative funding vehicles or the shadow banking system.
National authorities are likely to exercise forbearance towards
unsustainable local government liabilities, Gao said, allowing them to be
reduced gradually.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MT$$$$,MX$$$$,MGQ$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.