China’s frenzied construction of subway systems in cities all over the country could be easing, amid reports funding has been pulled for some projects as Beijing pushes to rein in debt levels.
The Chinese National Development and Reform Commission (NDRC), China’s most important economic planning body, is revising a 2003 policy on subway development, Caixin magazine reported on Saturday.
The NDRC wants to “raise the bar” for approving local rail projects amid growing concern over a debt-driven infrastructure boom, the magazine said, citing sources that it did not identify.
Population levels, as well as the economy and fiscal conditions of Chinese cities seeking permission for subway projects are to be more closely scrutinized, Caixin said.
Subway construction is a constant presence in China’s cities, with streets torn up to build the capacity needed to transport the swelling ranks of urban commuters. Beijing alone has been testing three lines: a driverless subway, a maglev train and a tram to be launched in the city’s western suburbs at the end of the year, the Xinhua News Agency reported in September.
However, investment in the sector appears to be tapering off, just as China’s leaders make reining in financial risks a top priority.
Fixed-asset investment in rail transportation has slowed almost to a standstill this year, increasing just 0.4 percent in the January-to-October period from a year earlier, National Bureau of Statistics of China data show.
That is down from 3.5 percent growth in the first four months of the year. Private rail transport investment — which makes up a tiny share of an industry that is dominated by state-backed enterprises — slumped 58.6 percent from January to October from the same period last year.
Cities in Inner Mongolia Province have been told by the Chinese government to halt infrastructure projects, Caixin reported earlier this month, adding that it included a 30 billion-yuan (US$4.52 billion) subway project in the city of Baotou and another valued at 27 billion yuan in Hohhot, the provincial capital.
Reduced rail investment would be a reversal for a country that has feverishly embraced trains. China operated nearly 2,600 high-speed trains at the end of last year, 60 percent of the worldwide total, Xinhua said.
The fast-rail network has surpassed 20,000km and leaders are targeting 45,000km by 2030, the news agency said in June.
If China is taking a more discriminating approach to infrastructure growth, it marks an about-turn. In the wake of the global financial crisis, the government championed projects in far flung provinces — from new highways to sports stadiums — as a way of keeping people employed and maintaining economic momentum. That spending saw leverage balloon to more than double GDP, a risk factor that Beijing is now trying to tackle.
People’s Bank of China Governor Zhou Xiaochuan (周小川) last month called for further measures to constrain local government borrowing.
For many investors, the liabilities built up by local authorities’ financing vehicles in the post-crisis spending binge became symbolic of China’s excesses when it comes to debt.
Both Moody’s Investors Service and S&P Global Ratings have reduced China’s credit rating this year citing risks from extreme leverage, while the IMF said in June that deep reforms will be needed to break away from debt-fueled growth.
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