Stimulus Plan Sparks Spend up on Infrastructure Projects

Provincial governments on China's mainland have proposed more than 10 trillion yuan (US$1.46 trillion) in infrastructure spending, state television reported Sunday, following the central government's launch of a massive stimulus plan to revive slowing economic growth.

The central government earlier this month announced a 4-trillion-yuan stimulus package, including rail and infrastructure projects as well as increased social spending, as China strives to offset a sharp drop in demand for the exports which fuel its economy.

The biggest proposal came from Yunnan Province in the southwest, which plans to invest 3 trillion yuan over the next five years.

Within a week, the governments of various provinces announced massive-scale investment blueprints, the China Central Television report said. Based on a rough calculation, the current total investment by all the provinces and cities has exceeded 10 trillion yuan.

China's economic growth slowed in the latest quarter to 9 percent, down from last year's 11.9 percent. That prompted the central government to launch a stimulus package that aims to boost growth through heavy spending over the next two years on construction, tax cuts and aid to the poor and farmers.

China puts the total value of its plan at 4 trillion yuan, but only 1.2 trillion yuan is coming from the central government. The rest is expected to come from local governments and state-owned enterprises. The plan also includes previously announced projects.

Many local governments are trying to win central government approval or financing for previously proposed projects by publicizing them after the launch of the stimulus plan, which calls for higher spending on airports, highways and other infrastructure.

The central government's stimulus package represents a drastic step away from lending curbs and other anti-inflation measures it imposed over the past three years but has been rolling back since mid-2008 as growth slowed.

Zhang Liqun, a researcher at a think tank attached to the Cabinet's planning agency, said the provinces' planned spending is focused on projects involving rail, road, port and low-income housing construction, according to the CCTV report.

"It will have quite an obvious effect on the country's medium and long-term economic development," Zhang said. He cautioned that the country should also watch out for possible signs of overheating in investment next year if the economy improves.

The People's Bank of China needed to pay more attention to the structural adjustment of the economy, as it combats the impact of the global financial crisis, the central bank Governor Zhou Xiaochuan said on its Website.

Source: CRIEnglish