China’s top 5 infrastructure projects set to cost US$131 billion, but overall investment set to drop amid debt fears

Name: China builds over 4,000km of railway in 2020
Uploaded: 2021-02-14T10:15:15.000Z
Duration: 1 min 28 s
Description: China builds over 4,000km of railway in 2020

Last year, China turned to its old playbook to drum up growth amid the coronavirus outbreak by boosting investment spending on infrastructure projects

But growing pressure on local government finances are among the reasons that the growth of infrastructure investment could slow

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China’s total fixed-asset investment rose to 51.9 trillion yuan (US$8 trillion) in 2020, an increase of 2.9 per cent compared to the previous year, but at the same time, its overall debt level also rose to 270.1 per cent of gross domestic product (GDP) from 246.5 per cent in 2019. Photo: Xinhua

Amanda Lee

Published: 6:15pm, 14 Feb 2021Updated: 10:40pm, 14 Feb 2021

Deteriorating local government finances and concerns about mounting public debts are likely to result in China gradually curbing local government infrastructure projects this year, analysts said, although the top five approved last year are still set to cost close to 850 billion yuan (US$131.7 billion).

China’s total fixed-asset investment rose to 51.9 trillion yuan (US$8 trillion) in 2020, an increase of 2.9 per cent compared to the previous year, but at the same time, its overall debt level also rose to 270.1 per cent of gross domestic product (GDP) from 246.5 per cent in 2019.

“Stabilising investment is the key to stabilising economic growth, and the growth of local government debt is critical to infrastructure investment,” said the National Institution for Finance & Development (NFID), a government-linked think tank, who released the data about China’s debt level.

“Infrastructure investment for the whole year of 2020 increased by 3.41 percentage points more than the growth rate of nominal GDP, but its stimulus effect was limited compared to the scale of debt expansion. The increase in debt growth and the slowdown in economic growth have jointly raised the level of leverage.”

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China builds over 4,000km of railway in 2020

The growth rate for China’s infrastructure investment has slowed in recent years, and according to NFID estimates, it was 3.3 per cent in 2019, compared with 3.8 per cent in 2018 and 19 per cent in 2017.

Growing pressure on local government finances are among the reasons that the growth of infrastructure investment could slow further, with analysts expecting Beijing to reduce the limit for local authorities to issue special purpose bonds to fund projects.

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