Beijing: China on Friday ruled out introducing a stimulus to arrest the slowdown of the economy but instead announced USD 260 billion worth of infrastructure projects, including railway construction, to spur growth.
China is to invest more than 1.6 trillion yuan (USD 260 billion) in infrastructure in an economy where growth is expected to slow and fiscal deficit increase, according to the work report submitted by Premier Li Keqiang to the legislature, the National People’s Congress (NPC) currently under session. China will invest over 800 billion yuan (USD 133 billion) in railway construction this year while investment in major water conservancy projects will exceed 800 billion yuan, Li said in his report.
China will increase effective investment in public services, Li said. Over 8,000 kilometres of railway track will be opened to traffic this year and construction on the 57 ongoing major water conservancy projects must be accelerated, Li said, adding that 27 more projects will start this year. China already has 16,000 km of high speed tracks, which amounts to 60 per cent world total, he said. Xu Shaoshi, minister in charge of the National Development and Reform Commission, China’s planning body said yesterday that China has no plans to introduce any stimulus but underlined importance of investments, which he believes continues playing a key role in promoting Chinese economy.
“We need to encourage multi-pronged investment and increase investment efficiency,” he said at a press conference. China wants to avoid economic growth based on investments and instead looks to have a consumption driven growth rate. Speculation about a stimulus was rife as China announced USD 570 billion stimulus package in 2008 to revive the economy following the global economic crisis. Xu said that more investment will be made to increase the supply of public products and services, ranging from information technology and electricity to railway and water conservancy projects, in the world’s second largest economy that is still lagging behind industrialised countries in infrastructure construction.
China may face more economic difficulties in 2015 than last year, said Li in the report, with domestic investment, consumption and the international market all under pressure. China lowered the growth target of the gross domestic product (GDP) by half a percentage to around seven per cent for 2015, after the economy registered 7.4 per cent expansion last year, the lowest in 24 years.
“The current economic growth rate remains weak and the government feels the need to step up proactive economic policies to counter headwinds,” said Zhao Yang, China chief economist of Nomura, Japan’s leading financial institution.
“The more proactive macro policies will reduce the risk of an economic hard-landing,” Zhao told state-run Xinhua news agency. The government will build an additional 7.4 million new urban apartments for low-income residents and renovate 3.66 million substandard rural houses.
Continuing a proactive fiscal policy, China will see its fiscal deficit target increase from 2.1 per cent of GDP to 2.3 per cent, below many economists’ expectations of above 2.5 per cent. Out of the planned 1.62 trillion yuan deficit, 500 billion is slated for local governments. (PTI)
