China to rein in infrastructure building binge, analysts predict
Slowdown comes as the authorities try to curb massive levels of debt in the economy
China’s frenzied construction of roads, bridges and subway systems is set for a major slowdown, adding a headwind to economic growth in 2018.
The nation’s fixed-asset investment in infrastructure will grow 12 per cent next year, according to the median estimate in a Bloomberg survey, down from almost 20 per cent in the first 10 months of this year. All 18 economists in the survey anticipated a moderation, adding to reports by Morgan Stanley, Goldman Sachs and UBS Group predicting a similar trend.
The cooling construction fever is taking shape as the authorities renew a pledge to focus on debt management following the Communist Party Congress in October. In a rare move, China has suspended subway projects in some cities and scrutiny has also toughened on public-private partnerships – until now a widespread way to fund projects.
The easing could even threaten global capital expenditure growth as China represents one-fifth of the world’s total investment, according to estimates by Oxford Economics.
“China is stepping up efforts in deleveraging, reduction of overcapacity, pollution control and reining in property prices,” said Robin Xing, chief economist at Morgan Stanley Asia in Hong Kong. “So we believe investment in property and infrastructure will slow down, leading to the deceleration in the economy.”
Xing estimated the slowdown would dent demand for commodities, while having a limited impact on employment and consumption, given resilience in the “new economy” led by services. The bank forecasts infrastructure investment growth to slow to about 13 per cent next year and 12 per cent in 2019.