Coronavirus outbreaks weigh on China’s infrastructure spending push
- China’s hardline zero-Covid policy is putting financial pressure on local governments and ‘limiting’ their ability to spend on infrastructure
- Beijing has set a growth target of ‘around 5.5 per cent’ this year and infrastructure investment is a key driver of the economy
China may have turned to its old playbook of infrastructure spending to drive economic growth, but with many local governments facing financial constraints due to the worst coronavirus outbreak in two years, such expenditure may not be as effective as in the past, analysts said.
“There are limitations as to what [local governments] can do right now,” said Xia Le, chief economist for Asia at BBVA Research. “They have to tackle the outbreaks on the one hand, and expand investment on the other hand. Even though there are expectations from the central government to push for infrastructure spending, at local government levels, it’s difficult.”
China’s policymakers have pledged to step up support for the economy, which is under growing pressure from a resurgence of Covid-19 outbreaks.
Vice-finance minister Xu Hongcai said on Tuesday that China would speed up issuance of local government special purpose bonds to help spur investment and stabilise the economy.