Sat, Jul 28, 2012 - Page 15 News List

China steps up stimulus spending at local level

AP, SHANGHAI

Workers labor on the construction site for a station on the subway system in Changsha, China, on July 13.

Photo: Bloomberg

China is stepping up stimulus spending at the local level to counter its economic slowdown, with one inland city announcing plans for US$130 billion in investment projects.

In announcing earlier this week plans for dozens of projects, officials in Changsha said increased investment was the “inevitable choice” to counter sluggish growth.

A notice on the city government’s Web site said investments would total 829.2 billion yuan (US$130 billion), but gave no specific details, referring only to services and investment projects.

As part of the government’s “mini-stimulus” program, several other cities have disclosed plans to subsidize housing purchases or otherwise act to support the construction spending that remains the lifeblood of China’s economy.

China’s economic growth slowed to a three-year low of 7.6 percent in the second quarter, prompting Beijing to launch various piecemeal initiatives meant to fight off the slump. They include 66 billion yuan to build affordable housing and 26.5 billion yuan to subsidize sales of energy-efficient appliances.

“Monetary and fiscal stimulus measures are evidently restarting the investment cycle, which will drive production in the near term,” Moody’s Analytics economist Alaistair Chan (陳志雄) said in a research note.

He pointed to increased or renewed investments in railway, water, gas and electricity projects.

Such policies will support a “soft landing” for the economy, Chan said, though longer term growth will be more subdued than in the past.

“The years of better than 8 percent annual expansion are over, in our view,” Chan said.

He forecasts growth at about 7.8 percent next year.

Nanjing has said it plans to subsidize home purchases by some first time buyers. Other cities have also stepped up investment in public housing, alternative energy, petrochemicals and other areas.

It is unclear if Changsha’s ambitious blueprint will be carried out fully.

Many Chinese cities are already saddled with massive debt burdens from lavish spending in 2008-2009 meant to ward off the impact of the global crisis.

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