MNI EXCLUSIVE: China May Bring Forward Projects Amid Stimulus

     BEIJING (MNI) - Chinese authorities could bring forward construction

projects in a bid to boost growth in infrastructure investment this year to

about 10% to offset the impact of coronavirus and achieve the government's aim

of doubling GDP from 2010 levels, policy advisors told MNI, but doubts linger

over whether it is possible to ramp up high-tech spending fast enough to meet

the goal.

     To pay for the increase in project spending, issuance of

infrastructure-backed local government special bonds could be expanded to over

CNY3 trillion from last year's CNY2.15 trillion, or the central government could

consider issuing CNY1 trillion of special China Government Bonds, especially to

retail investors, according to Liu Xiangdong, deputy director of economic

research at the China Center for International Economic Exchanges.

     But the great bulk of the additional funding would come from the private

sector, Liu said, noting that construction plans initially projected for 2021 or

later could be brought forward to this year to power growth. Infrastructure

investment grew 3.8% to about CNY15 trillion in 2019, according to Liu.

     Regulatory changes would open up telecommunications, oil and gas and

railways to the private sector, providing ample scope for additional investment,

he said, suggesting that authorities consider such moves.

     --ABUNDANT FUNDING

     "Funding is relatively abundant in the market. The key is whether there are

profitable projects," Liu added. "It is possible to achieve a year-on-year gain

of about 10% in infrastructure investment from the low base last year, if

construction plans are brought forward," Liu said.

     But Yan Se, associate professor with Peking University and chief economist

with Founder Securities, was less optimistic. Infrastructure investment may only

increase by 7% this year, and the Communist Party's hopes of doubling GDP from

2010 may be in jeopardy.

     Top policymakers hope much of the spend in projects will come in "new

infrastructure", such as 5G base stations, big data centres, artificial

intelligence and electric vehicle charging stations, together with ultra-high

voltage electricity transmission and intercity railways. But even Liu thought

investment in such areas could be less than CNY1 trillion this year, before

accelerating.

     "Investment in 5G stations this year may reach above CNY200 billion, and in

charging stations maybe it will be in the tens of billions," said Liu. A report

by the China Academy of Information and Communications Technology estimates that

it may take five years for 5G investment to total CNY1.2 trillion.

     --HIGH-TECH INFRASTRUCTURE

     The so-called "new infrastructure" projects will be carried out by

state-owned enterprises and private companies, rather than heavily indebted

local governments, according to Zhang Ping, Deputy Director of National

institute of Finance and Development.

     Some domestic Chinese media are reporting that 20 provinces in China are

going to invest more than CNY50 trillion in a stimulus package to shore up the

virus-hit economy. However, only 16% of these could feasibly be carried out this

year, according to MNI's examination of provincial lists of major projects.

     Governments throughout China are still working on applications for new

infrastructure, according to Zhang. Liu noted also that the central government

will directly provide a large part of China's infrastructure spending this year.

     "At present, the most important problems are beginning the construction of

the infrastructure and making sure funds are available. The resumption of

infrastructure construction should be in the second quarter," Zhang added.

     The State Council on Tuesday urged local governments to accelerate work on

11,000 key construction projects by offering support in labour, raw materials,

funding and virus prevention equipment. Local authorities should also speed the

issuance and use of special bonds for infrastructure projects and prepare for

more than 4,000 initial key projects planned this year while increasing the

pipeline of follow-up works.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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