China's top economic planner says investment will remain a key driver of growth as Beijing encourages urbanisation and transforms the mainland's economic structure.
National Development and Reform Commission (NDRC) chairman Zhang Ping's comments suggest the authorities may follow last year's practice and maintain a fast pace of project approvals to spur growth.
"Investment plays a crucial role in driving economic growth. Our country is still a developing nation," Zhang told a press briefing on the sidelines of the annual session of the National People's Congress in Beijing yesterday.
He said industrialisation, urbanisation, informatisation and agricultural modernisation - four areas highlighted by premier-in-waiting Li Keqiang - all need to be deepened.
"There's still huge investment demand in our country," he said.
The NDRC is targeting investment growth of 18 per cent this year, down from last year's 20.3 per cent. But local authorities remain keen to pour money into infrastructure and other projects.
Provincial governments made aggressive investment plans during their people's congress meetings earlier this year. Guizhou has targeted fixed-asset investment growth of 30 to 40 per cent, while Gansu and Xinjiang want to expand investment by 30 per cent.
"The 18 per cent investment growth target will be easily surpassed," Citigroup economist Ding Shuang said.
If investment really slowed to that level, he said, the mainland's economic growth rate would drop to 7 per cent this year, shy of Beijing's target of 7.5 per cent.
Zhang said priority would be given to investment in economic areas and geographical regions of greatest need and should be focused on improving people's living standards, such as building schools, hospitals and underground water pipelines. Meanwhile, roads, railways and airports in the poorer western region and projects designed to protect the environment would also need investment, he said.
"We still have huge space for expanding domestic demand," Zhang said, while saying investment should be directed away from industries including fibre optics and wind power which had built up excess capacity.
Zhang also said "urbanisation is the biggest potential force spurring domestic demand".
"It will not only involve construction of cities but will also see consumption of migrant workers increase manyfold after they become city dwellers," he said.
The NDRC was working with other government departments on urbanisation plans that might be introduced in the first half of this year, if things ran smoothly, Zhang said. The official urbanisation rate has exceeded 50 per cent, but experts say the level is much lower because many migrant workers are excluded from urban social welfare benefits and education opportunities.
Zhang acknowledged the gap between urban and rural areas remained large. While major cities keep growing and attracting prime resources, development in smaller cities and towns had lagged behind.
The NDRC is also looking at amending a domestic fuel-price-adjusting mechanism because it does not reflect global market fluctuations in a timely manner.
"We hope to shorten the cycle of adjustment so as to adapt to frequent global oil price changes," Zhang said.