China to pump hundreds of billions of yuan into key industry projects, with ‘no need to cover up its ambitions’

Manufacturing and technology projects deemed critical to China’s economy are getting a boost under President Xi Jinping’s new strategy of self-reliance

The effort comes as a growing list of Chinese businesses, including Huawei, have been blacklisted by Washington, restricting their access to American products and technologies

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China’s hi-tech medical equipment sector looks to be eligible for a big injection of state financing. Photo: Xinhua

Published: 6:59pm, 11 Sep 2020Updated: 10:13am, 14 Sep 2020

China’s industry ministry has joined hands with China Development Bank – Beijing’s financing arm that bankrolls state-backed projects – to pump hundreds of billions of yuan into designated manufacturing and technology projects as the government further directs resources into areas it deems critical to the nation’s economic well-being.

The Ministry of Industry and Information Technology (MIIT) said in a statement on Friday that it has targeted an initial batch of 105 projects across the country, with a combined planned investment of 710 billion yuan (US$103.8 billion). Of that, about 300 billion yuan will come from bank loans.

China Development Bank agreed to lend 125.2 billion yuan to the development of 24 projects. The bank said it had granted a credit line worth 250 billion yuan to those projects in late March, meaning it has already opened up the government lending tap to help finance important projects nationwide.

However, neither the ministry nor the bank provided a list of the favoured projects. The unusual direct cooperation between China’s industry ministry and the policy bank in financing key projects is in keeping with China’s new “dual circulation” strategy. Under that plan, the country is looking to rely more on itself to make technological breakthroughs and to cut its dependence on imported products amid a prolonged trade war with the United States.

For instance, the Chinese government has launched a series of incentive policies to boost development in the semiconductor manufacturing industry. In addition, the increase in state involvement in the economy may become a topic of conversation in a video summit meeting scheduled for Monday between Chinese President Xi Jinping and European Union leaders led by German Chancellor Angela Merkel.

One of the major roadblocks to the conclusion of a China-EU investment treaty has been the European demands that China cut back on subsidies for domestic industries to create a level playing field for foreign firms.

At the same time, the increased state involvement in industrial development adds to concerns about waste and inefficiency. China’s previous attempts to develop its domestic solar-energy and electric-vehicle industries through state planning resulted in massive overcapacity, and a few high-profile chip projects have already failed in China despite significant support from local authorities.