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China Prioritizes Infrastructure Construction to Expand Domestic Demand, Says Chief Economist at CITIC Securities

BusinessChina Prioritizes Infrastructure Construction to Expand Domestic Demand, Says Chief Economist at CITIC Securities

In China, infrastructure is considered a key driver of economic growth, especially in the short term. Despite other economic engines revving up due to supportive measures in various fields, experts believe that infrastructure will continue to play a pivotal role in shoring up economic momentum in the country. Investment in infrastructure construction is expected to expand in the first few months of 2023 and log a growth figure between 10 percent and 15 percent in January, according to a recent report by CITIC Securities.

The role of infrastructure construction in expanding domestic demand has been prioritized by many high-level meetings in China. The State Council, the nation’s Cabinet, highlighted infrastructure construction as a crucial part of its plan issued in December. As a result, infrastructure builders are expected to make faster steps in their projects nationwide in the first half of the year. They have been buoyed by enhanced special local government bond support and other financial tools offered by policy and commercial banks. This support is expected to give a stronger lift to industries along the chain affected by COVID-19 disruptions and other woes in the past few years.

Projects nationwide have been reported to be progressing at a faster pace since the beginning of the year. State-owned contractor, China Railway 24th Bureau Group Corp Ltd (CR24), said its construction teams are stepping up efforts on key infrastructure projects, with many projects listed in local five-year plans charting paths for development. For example, its builders working in Ningbo, Zhejiang province, have started a key urban road project in Cixi, a county-level city. CR24 builders have faced a series of complicated preparation tasks, such as a tight schedule for building, transportation, and additional arrangement work for neighboring networks. However, they have seen an overall improvement in areas from working efficiency to labor supply, significantly pushing forward progress.

China’s local governments are also investing in infrastructure projects to address traffic congestion issues. The local government in Cixi has prioritized a plan to build more roads in its five-year plan of urban transportation, aiming to further facilitate trips between Cixi and neighboring areas. Meanwhile, a major milestone has been achieved by builders in Jiande, Zhejiang province, on a key bridge project for the Jinhua-Jiande High-speed Railway. The Jinhua-Jiande High-speed Railway connects the three cities of Jinhua, Lanxi, and Jiande with China’s major railway network. It is scheduled to open before October 2025 and aims to help cities further develop tourism attractions and provide a faster link between Zhejiang and inland provinces.

The special bond support from the Chinese government is expected to generate direct benefits in various industrial chains and attract social investment indirectly, according to a report by Securities Daily. Xu Hongcai, vice-minister of finance, stated during a news conference on March 1 that special local government bonds are crucial to expanding effective investment and stabilizing the economy. Appropriate special bonds will maintain stable government investment this year, he vowed.

In conclusion, infrastructure remains a crucial driver of economic growth in China, with the country continuing to invest heavily in infrastructure projects. The government’s support through special local government bonds and other financial tools is expected to provide a boost to industries affected by COVID-19 disruptions and other challenges in the past few years. The progress made in infrastructure construction and the completion of major projects, such as the Jinhua-Jiande High-speed Railway, are expected to facilitate economic growth and development in the coming years.

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