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
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.
According to a circular released by MIIT in April, the investment threshold for a project to receive cheap money from China Development Bank was set at 1 billion yuan (US$146.24 million).
There’s no need for China to keep a low profile or cover up its ambitions, given the obvious containment [policy] by the US
The only projects eligible for such financing are in cutting-edge industries such as information technology; new materials; high-end equipment; energy-saving and new-energy vehicles; medical equipment and pharmaceuticals; technological renovation of traditional manufacturing projects; and new infrastructure projects such as for 5G telecommunications and big data centres.
These sectors are similar to the key industries listed in the “Made in China 2025” programme – a state industrial policy plan to create national champions in cutting-edge technologies of the future, with government support.
The government was forced to put the plan on the back-burner after it triggered strong opposition from the United States and Europe. Even though Beijing no longer talks about the Made in China 2025 plan in public, the government’s ambition to use state power to forge industrial champions remains.
The joint programme by MIIT and China Development Bank is part of Beijing’s efforts to achieve “high-quality development of the manufacturing sector” after a growing list of Chinese businesses, including Huawei, have been blacklisted by Washington, restricting their access to US products and technologies.
Ding Shuang, chief Greater China economist of Standard Chartered Bank, said Beijing likely feels that “there’s no need for China to keep a low profile or cover up its ambitions, given the obvious containment [policy] by the US”.
“The new plan would be no different from the old one – it must take control of core technologies,” Ding said.
MIIT, which faces the immediate problem of dealing with the impact of US policies and the coronavirus, as well as long-term issues such as boosting the nation’s manufacturing base, is helping draft the new development plan for 2021-2025 under President Xi Jinping’s new self-reliance strategy.
Xiao Yaqing, China’s newly appointed industry minister, made a field visit last week to a jumbo jet assembly plant, jet engine research facilities and integrated circuit enterprises in Shanghai, urging the companies to “achieve breakthroughs in key areas and core technologies”.
China’s January-July manufacturing investment dropped 10.2 per cent from a year earlier, far larger than the national overall fall of 1.6 per cent, according to the National Bureau of Statistics.
