China orders U$120 billion infrastructure push amid slowing economy as Beijing steps up stimulus

A State Council meeting on Wednesday ordered state-owned policy banks to set up an 800 billion yuan (US$119.6 billion) line of credit for infrastructure projects

Beijing’s calls for faster implementation of growth-boosting policies have intensified with data showing China’s economy continued to decline in May

2-MIN READ2-MIN

Bloomberg Economics estimated China’s infrastructure spending came to 23 trillion yuan in 2021 (US$3.4 trillion). Photo: Xinhua

Published: 12:51pm, 2 Jun 2022Updated: 12:02pm, 10 Jun 2022

Beijing ordered state-owned policy banks to set up an 800 billion yuan (US$119.6 billion) line of credit for infrastructure projects as it leans on construction to stimulate an economy battered by coronavirus lockdowns.

The announcement, made at a State Council meeting chaired by Premier Li Keqiang, could help finance a significant chunk of infrastructure costs this year.

Bloomberg Economics estimated China’s infrastructure spending came to 23 trillion yuan (US$3.4 trillion) in 2021. Large policy lenders include China Development Bank.

Beijing’s calls for faster implementation of growth-boosting policies have intensified since official data showed that economic activity contracted in April and unemployment rose sharply.

High-frequency indicators suggest the decline continued in May, leading Li to warn last week of risks from a possible year-on-year contraction in the second quarter.

The infrastructure push will help Beijing support investment “amid weak credit demand in the private sector,” said Nomura Holdings economists led by Lu Ting.

Nomura estimates the government has a 6 trillion yuan funding gap, created in part by a sharp contraction in revenue from land sales, a key source of funding of infrastructure investment by local governments.