New | Doubt grows over China investment plans
A lack of capacity, motivation and funding on the part of the officials may see some of the local governments' investment projects fall through
Local governments on the mainland have rolled out trillions of yuan of investment plans for this year to bolster economic growth, but analysts doubt they will all be put into action.
Fourteen of the 31 provincial-level authorities had unveiled investment plans for projects with a combined value exceeding 15 trillion yuan (HK$18.6 trillion), the Shanghai Securities News reported yesterday.
The investments will focus on infrastructure, the environment and many emerging sectors deemed of strategic importance to the economy.
A fast pickup in consumption is unlikely because of the aggressive anti-corruption campaign led by President Xi Jinping, while external demand faces lots of uncertainties in global recovery, meaning local officials have few means at their disposal to stabilise growth other than embarking on another round of investment.
Despite the ambitious plans, analysts say local government officials lack the capacity, motivation and necessary funding to turn some of the plans into reality.
"Local governments have shown a clear sense of crisis amid an economic growth slowdown," said Liu Ligang, ANZ Bank's head of Greater China economics. "But I'm not that optimistic on whether the new wave of investment can be well implemented."
Liu said the changing incentive structure to measure local officials' performance, more prudent bank lending amid the anti-corruption campaign and tighter regulations on local governments' indebtedness were the main factors that would hinder investment expansion.