China is again increasing infrastructure spending to bolster economic growth amid the continuing drag of Covid-19 and a weakening global economy, with observers noting a corresponding rise in debt.
The official Xinhua news agency notes that capital spending on infrastructure rose almost 7% during the first five months of 2022 compared with the same period in 2021. Meanwhile, total investment in newly started projects during the period increased by 23%.
Last month, it was revealed that Chinese state-owned enterprises planned to invest some $1.5 trillion in non-traditional infrastructure projects between 2021 and 2025 (see further reading).
However, the investment has also pushed up the amount of debt owed by infrastructure operators. Nikkei Asia reported this week that China State Railway Group had accumulated debts of $882bn, almost 5% of China’s GNP.
Zhao Jian, a professor at Beijing Jiaotong University and a transportation expert, told Nikkei: “The government’s priority is economic growth and it doesn’t care about debt repayment, but each kilometre of railway costs 120 million yuan to 130 million yuan to build [US$17m-$19m].”
This means that China’s plans to add 30,000 more kilometres of rail by 2035 will require roughly $540bn.
The renewed call for infrastructure investment was reiterated at a recent State Council executive meeting, which decided to issue bonds worth $45bn for major projects, among other measures.
By the end of May, almost $300bn of special bonds had been issued, up $209bn in the same period last year. During the period, the country initiated 10,644 water conservancy projects, built 275,000 5G base stations, and expanded investment in healthcare and education by 28% and 9%, respectively.
China’s state-owned firms to spend $1.5 trillion on smart infrastructure
It was reported last month that Chinese state-owned enterprises plan to invest some $1.5 trillion in non-traditional infrastructure projects between 2021 and 2025 as the government acts to sustain economic growth, according to China Daily reports.
According to the news site, senior state-asset regulators said on Friday that the money would be spent on more than 1,300 “new infrastructure” schemes, meaning facilities that make use of emerging technologies such as 5G, AI and the internet of things
Peng Huagang, secretary-general of the Assets Supervision and Administration Commission of the State Council (SASAC), told a news conference in Beijing that the investment would promote the transformation of traditional sectors and bolster the growth of emerging industries.The aim is to apply the benefits of AI and big data processing to the bricks-and-mortar economy and give smaller companies a guaranteed pipeline of orders to persuade them to upgrade their businesses.
The digitisation drive will be supported by a national processing infrastructure. The National Development and Reform Commission, China’s top economic regulator, announced in February that the country would put in place a system for big data integration, based on eight computing hubs and 10 clusters of data centres.
Peng said the programme of works would be carried out by around 70 companies, which last year invested more than $60bn to expand their capacity to carry out digitally enhanced schemes.
He added that this expansion had been supported by China’s structural adjustment and innovation funds for state-owned companies. This has led to the development of a number of innovations, such as new energy vehicles, the Beidou satellite navigation systems and blockchain, as well as collaborative platforms for sectors such as offshore engineering equipment, logistics and big data processing.
Weng Jieming, vice-chair of SASAC, said at the press conference the government would focus on the structural reform of state-owned companies. He said 47 of them had been reorganised over the past 10 years, citing as examples China Railway Rolling Stock and the China Anneng Construction Group.
He added the overseas assets of the largest state-owned companies had reached $1.2 trillion, distributed over some 8,000 projects in more than 180 countries and regions.
* With additional reports from Global Construction Review