Economic review

Local gov'ts to push investment

2018-01-12 09:31:00 (Beijing Time)         Global Times

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Spending on infrastructure, industries highlighted

The economic planning departments in a number of provinces have revealed some information after early meetings this year that cast some light on their development trends for 2018.

The Shanghai Securities News reported on Wednesday that at least four areas - East China's Anhui Province, Northwest China's Shaanxi Province, Northwest China's Xinjiang Uyghur Autonomous Region and North China's Hebei Province - have each planned to complete key investment projects worth a total of 100 billion yuan ($15.37 billion) within the year.

Another trend is that many provinces aim to invest in industrial projects. Central China's Hunan Province, for example, plans to push the development of 100 industrial projects, according to the report. Transportation infrastructure investment remains a key focus, and construction of a batch of high-speed railway projects is expected to begin this year.

Shaanxi, Xinjiang and Hebei have vowed to complete projects totaling 500 billion yuan, 450 billion yuan, and 800 billion yuan, respectively.

The report came after some experts had expressed concerns about China's slowing fixed-asset investment and persistent debt issues.

Yu Yongding, a senior fellow with the Chinese Academy of Social Sciences, said in a Project Syndicate article on January 2 that optimism about China's economic growth in 2018 should be tempered given the nation's slowing fixed-asset investment growth.

Local authorities called off subway construction plans in Baotou, North China's Inner Mongolia Autonomous Region, over concerns that the project could weigh too heavily on the local government's balance sheets, according to media reports in November 2017.

The news was followed by Inner Mongolia admitting in January that it had falsified its financial data in the past.

"The false data in Inner Mongolia and other localities will have an adverse effect on fixed-asset investment, as their spending is planned according to their general budget revenue," said Tian Yun, director of the China Society of Macroeconomics Research Center.

"But overall, China's economic hotspots are in the south and east of the country, so data falsification in the northern provinces won't damage the whole picture," Tian told the Global Times.

Ye Qing, deputy director of the statistics bureau of Central China's Hubei Province, told the Global Times that manufacturing investment is mainly driven by the corporate sector, and each year's government plan involves infrastructure development.

"The situation in Baotou revealed the rashness of the local government whereas a shift to industrial investment will produce more benefits for the people, but more attention should be given to these projects so that they can be completed on time," Ye noted.

Tian said using leverage to invest in infrastructure can be problematic in some areas, but there is nothing inherently wrong with such a development model.

"The new infrastructure is a prerequisite for new production forms such as big data, cloud computing and free trade ports," Tian said, noting that Southwest China's Guizhou Province has successfully overhauled its economy by developing its big data capabilities as well as its infrastructure and tourism.

Foreign investment factor

In a statement posted on the Development and Reform Commission of Hunan Province, the local government vowed to conduct a negative list approach to manage foreign investment and push for the orderly opening-up of financial, cultural and medical sectors.

Ye said foreign companies usually choose to steer away from infrastructure projects, as it takes too long to recuperate their investment.

Regarding foreign companies' concerns that China may not open the doors to overseas investment in areas of particular interest, Tian said that nowadays China has enough foreign exchange reserves so it can be more picky about foreign investment.

"In the 1980s, China needed foreign currency, so it had the urge to attract foreign investment," Tian said. "Nowadays, it will only invite foreign investment that meets its developmental needs. It is a matter of reciprocity, as it is also hard for Chinese companies to invest in developed countries where the need for foreign currency is not great."