Business / Industries

Spending on roads, railways will lift economy

By LAN LAN (China Daily) Updated: 2015-04-16 09:46

Economists are hoping new infrastructure investment will inject vitality into the slowing Chinese economy, which is currently being held back by a lagging property market and continued overcapacity in the manufacturing industry.

The country's urban fixed-asset investment rose 13.5 percent year-on-year to 7.75 trillion yuan ($1.26 trillion) in the first quarter, compared with 13.9 percent in the January to February period, the slowest expansion since 2001, the National Bureau of Statistics said on Wednesday.

Yue Guoqiang, an investment expert at the Academy of Macroeconomic Research, under the National Development and Reform Commission, said relatively robust investment in infrastructure has acted as a buffer against any sharper slowdown in growth.

In the first quarter, overall infrastructure investment, excluding the power industry, rose 23.1 percent year-on-year to 1.28 trillion yuan. Investment in the rail and transportation sectors rose 23.8 percent, while investment in public facilities increased by 23.5 percent.

Policymakers have pinned their hopes on accelerating those levels of investment to boost the economy.

China has set a target of injecting a total of 800 billion yuan into domestic railway construction this year, around the same level as last year. Railway and highway projects in the central and western regions of China will be a priority, said officials.

Although China has managed to build a vast largely new national rail system over the past decade, experts think there is still great potential for further inter-city projects and urban rail networks.

The planned "One Belt, One Road" initiatives, proposed by President Xi Jinping in 2013, are also expected to inject huge momentum into the development of the country's western regions with new infrastructure projects at its core.

According to a draft plan of the National Railway Administration, China plans to invest 2.8 trillion yuan in railway construction within the 13th Five-Year Plan (2016-20), the local 21st Century Business Herald reported on Tuesday.

Yue said, however, that fixed-asset infrastructure investment activity is likely to remain soft in coming months, partly because slower local fiscal revenue and market sentiment had squeezed local government spending.

Guan Qingyou, executive director of Minsheng Securities' research institute, said the manufacturing sector continues to suffer serious overcapacity, leaving little prospect of any new production being added in these sectors as market expectations remain low.

Investment in the manufacturing industry rose 10.4 percent in the first quarter.

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