A widely-anticipated push by China’s government to boost construction to stabilise growth in the world’s second-largest economy has yet to materialise, a blow to hopes that Chinese stimulus would lift global growth early on this year. The Communist Party has made its stimulus goals clear in recent months, pledging to “front-load” pro-growth policies in 2022, pushing early sales of bonds to fund investment and easing curbs on financing for the property sector. The Politburo, the party’s top decision-making body, suggested more support could be on the cards, saying on Friday that economic policies will be strengthened this year. However, recent data suggests no real turnaround in construction yet. The latest purchasing managers’ surveys show a weakening in the sector in January ahead of the Lunar New Year holiday, equipment sales have slumped, and unused commodities are piling up in storage. Financial sector must ‘develop with Chinese characteristics’ after graft probe The slow start to the year is leading some economists to downgrade their forecasts for China’s growth, suggesting the country will provide less support to global demand as the recoveries slow in the United States and Europe. ING cut its prediction for China’s 2022 growth last week to 4.8 per cent from 5.4 per cent, saying investment growth is not picking up as strongly as it should be. Signs of sluggish construction are evident elsewhere as copper held in warehouses tracked by the Shanghai Futures Exchange surged by 28 per cent in the week ending February 18 and 17 per cent last week, while inventories of steel rebar hit a 10-month high, according to data-provider Steelhome. Excavator sales, a leading indicator of construction activity, fell by 48.3 per cent in January from a year ago, data from the China Construction Machinery Association showed, a deeper decline than the previous month. Domestic expansion, infrastructure key to China’s growth as Omicron spreads Meanwhile, usage of excavators fell by 35 per cent to the lowest level in a year, according to data from equipment-maker Komatsu. Local governments have money to spend, after issuing more than 2 trillion yuan (US$317 billion) of special bonds dedicated to investment projects since October, according to Bloomberg data. However, ING’s Iris Pang said “if local governments do not act with the same sense of urgency as the central government, the preapproved limits are worth little for the economy”. What can we expect from China’s 2022 ‘two sessions’ as Beijing plots course? More clues will come during the National People’s Congress, the annual legislature meetings that kick off this week, where local governments will learn the total amount of bonds they will be allowed to issue this year. Without a stronger signal from the meeting “it is hard to see local governments really accelerating things,” said Craig Botham, chief China economist at Pantheon Macroeconomics. While China’s central bank has pivoted to monetary easing, latest credit data showed an unusual decline in the amount of money held in short-term deposits at banks in January. The drop “tells us corporates and governments mostly sat on their hands,” Botham said. Property developers are the other major source of investment in China, but they are struggling with debt and falling sales. High-frequency data suggest demand for properties likely remained weak in January Goldman Sachs Beijing has encouraged banks to increase mortgages and cut interest rates in more cities across the country, but home sales have hardly improved, according to weekly data from major cities from China Real Estate Industry. That means property developers are still facing declines in down payments, which are one of the main remaining sources of income to pay for investment in new projects. “High-frequency data suggest demand for properties likely remained weak in January,” Goldman Sachs said in a note last week. Mortgage lending “only accelerated modestly in January as property policy easing has been relatively measured thus far,” the Goldman Sachs analysts wrote. The limited data we have so far suggest there hasn’t been much, if any, improvement in construction so far this year Adam Wolfe Economists at Morgan Stanley, who have been among the most bullish on China’s growth prospects this year, said this month that housing policy support has been “muted” so far, posing downside risks to their full-year gross domestic product forecast of 5.5 per cent. Growth momentum is weakening, with the latest Bloomberg survey showing economists have cut their forecasts for quarter-on-quarter expansion to 1 per cent from 1.2 per cent previously. “The limited data we have so far suggest there hasn’t been much, if any, improvement in construction so far this year,” said Adam Wolfe, an economist at Absolute Strategy Research in London. While the increase in local government bond issuance should result in more investment “it might take a few more months to see those infrastructure projects get under way. I’d expect to see construction picking up gradually from the second quarter”.