Chinese President Xi Jinping (習近平) has called for an “all out” campaign to build infrastructure, Xinhua news agency reported, marking the latest attempt by leaders to boost growth in the economy battered by COVID-19.
Despite struggling to defeat the country’s worst outbreak in two years, the leadership is digging in its heels with a strict “zero COVID” policy that involves lockdowns in the biggest cities and mass testing.
However, the measures have snarled supply chains and hammered business morale, sending shock waves through the global economy and markets.
Photo: AFP
“Infrastructure is an important support for economic and social development,” Xi said at a high-level meeting on Tuesday, Xinhua reported.
China’s “infrastructure is still incompatible with the demand for national development and security,” the Chinese Central Committee for Financial and Economic Affairs said.
The meeting identified several sectors, such as transport and energy, where an infrastructure boost is needed, including the construction of ports and airports.
Lockdowns have clogged supply chains and transport networks, including in the economic dynamos of Shanghai and Shenzhen, as well as the northeastern grain basket of Jilin.
Xi’s comments are the latest in a series of statements and steps aimed at boosting confidence in the economy and reassuring markets, but traders have remained unmoved by the latest sweeping pledge, while a major spending push could also reignite debt worries.
After the 2008-2009 financial crisis, the Chinese government launched a stimulus package worth hundreds of billions of US dollars, including massive infrastructure investment, but that piled on the debt for local governments and state enterprises.
With risks to consumption and manufacturing exports, “initiatives to ramp up infrastructure spending are a direct policy tool to lift government spending,” said Rajiv Biswas, Asia-Pacific chief economist at S&P Global Market Intelligence.
However, infrastructure is “not a quick fix,” Nomura Holdings Inc chief China economist Ting Lu (陸挺) said.
“Lockdowns make the task of ramping up infrastructure investment more difficult due to ... travel bans and a shortage of construction workers in ... [the affected] areas,” he said.
It would also “be unrealistic to expect much faster infrastructure investment growth, and its pace ... would only fill a small part of the gap left by slowing export growth, the large property sector contraction and the rising costs of China’s ‘zero-COVID’ strategy,” Nomura had written in a recent investor report.
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