Hunan provincial capital Changsha has unveiled an 829.2 billion yuan (HK$1.02 trillion) stimulus package, prompting speculation it could be a model for other local governments to counter the economic slowdown. Changsha announced on Wednesday that it would recommend 195 projects to investors this year to attract a total investment of 829.2 billion yuan, in an attempt to 'stabilise economic development', the official China News Service reported. The announcement follows a 3 trillion yuan stimulus package unveiled by Guizhou's provincial government this month, which will focus on eco-tourism infrastructure. Capital of the central Hunan province, Changsha is known for heavy machinery and non-ferrous metal industries. Fixed-asset investment was 351 billion yuan last year, including public and private investment. The city's gross domestic product expanded 12.9 per cent from a year ago to 289.65 billion yuan in the first half. The pace was faster than the 7.8 per cent gross domestic product growth of the entire mainland. The State Council approved a 'strategic plan to promote the central region's economy' after Premier Wen Jiabao said earlier this month China would rely mainly on investments to lift its flagging economy. The central region includes six provinces - Hunan, Hubei, Shanxi, Anhui, Henan and Jiangxi - which lag behind the coastal region in economic development but are increasingly more appealing to international investors because of their cheaper land and labour costs. Nomura Securities economist Zhang Zhiwei said the plan 'is a rather abstract guideline without headline investment numbers attached, but it opens the door for local government stimulus such as that announced by Changsha'. Zhang said even if the sum was spent over five years, the implied annual investment would be 160 billion yuan - or 46 per cent of the city's total fixed-asset investment last year. The investment is to be directed into a range of projects including airport, subway and urban infrastructure facilities, as well as energy-efficient industries, according to the Changsha municipal government. Chen Runer, the Communist Party secretary of Changsha, said it was hoped that banks could 'find projects and co-operate effectively' with companies in order to contribute to the city's development, the news service reported. Mizuho Securities economist Shen Jianguang expected more local governments to follow suit. 'Following the recent leadership change at the local government level, new officials are eager to implement stimulus measures to boost their track record,' he said. '[State Council approval] opens the door for local governments to double their efforts to stimulate the economy.' The local government reshuffle is a prelude to the once-in-a-decade top leadership transition this autumn. The economy remains an important factor in appraising officials' performance. Shen expected Jiangsu capital Nanjing and Ningbo in Zhejiang would be among the next cities to unveil stimulus plans. Many economists have warned that over-reliance on infrastructure investment may have similar consequences to those arising from the 4 trillion yuan stimulus brought in to address the 2008 global financial crisis. That resulted in deteriorating solvency of local governments, banks saddled with bad loans and white elephant projects. The International Monetary Fund in a report this week expressed 'concerns about the sustainability of such a high level of investment in the context of weak external demand and excess capacity'. The fund encouraged Beijing to direct fiscal reforms towards spurring private consumption, including through tax reforms and a stronger social welfare net. Mainland retailers including Suning Appliance and Gome Electrical Appliances and the big airlines have reported losses or profit declines for the first half of this year, suggesting domestic consumption is losing steam. 12.9% Changsha's gross domestic product grew this much from a year ago to 289.65 billion yuan in first half•China's GDP growth was 7.8 per cent
