China’s Li Keqiang calls for new infrastructure push to shake off economic slowdown
- China’s State Council says it will channel funds towards construction of highways, waterways and port projects
- The targeted financing reflects Li’s long-standing caution towards flooding the economy with excess liquidity
China has announced a new round of infrastructure projects to be funded by bonds and interest subsidies for participating banks, underlining the government’s desperation to get the economy back on track and stabilise employment.
The government plans to raise 300 billion yuan (US$44.7 billion) by selling policy bonds and other financial instruments, Premier Li Keqiang said at Wednesday’s State Council meeting.
They will be issued by state-owned and policy banks, while the central government will provide two-year interest subsidies to encourage lending for the projects.
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The proceeds must account for less than half of each project’s total investment, or serve as a bridge for infrastructure funded by local government special purpose bonds.
The targeted financing reflects Li’s long-standing caution about excess liquidity flooding the economy, although authorities are counting on bank credit to expand “effective investment” and boost the job market and household consumption.
The State Council, China’s cabinet, has its work cut out to reverse the country’s increasingly gloomy economic outlook, with lockdowns in Shanghai and other Chinese cities likely to have caused a contraction in growth in the second quarter, following expansion of 4.8 per cent in the first quarter, analysts said.