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China Economy Gets USD 157 Billion Stimulus with Sanction for 60 Infrastructure Projects

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Published on : Sep 14, 2012

Seen as a much required economical stimulus to revive the economy stuck in the worst slowdown in the past three years, China has approved 60 different infrastructure projects valued at more than USD 150 billion. Immediately after the official confirmation of the decision, stocks of major industries such as cement and steel have seen a rise on hopes generated by plans to build ports, highways, airport runways, and other large-scale projects.

The step by China’s economic planning body National Development and Reform Commission is seen as part of efforts by China, the world growth engine, to fuel growth from the fourth quarter. The news of the green signal for these ambitious projects has resulted in a jump in prices of steel contracts and their share values. Experts also opine that the move is driven by the approaching once-in-ten-years regime change.

The announcement confirmed the government’s decision to spend USD 157 billion (approximately 1 trillion yuans) on infrastructure projects in order to boost the sentiments and encourage people to invest more. The massive size of the stimulus is estimated to be equivalent to the quarter of the total stimulus package announced in 2008 during the global recession. The projects approved include 1254 miles of road networks, five ports and warehouses, 9 STPs (Sewage Treatment Plans), and upgrade of two waterways.

The current stimulus package is part of the country’s ongoing investment efforts. A day earlier the government approved projects for subways in 18 cities. The previous increase in land supplies and rise in railway-building budget were some of the other announcements as part of the stimulus package. The actions have been praised by economists as final real measures by government to tackle the economic slowdown and boost investor confidence. Spending on urban infrastructure and home supplies are recognized as the best ways to support urbanization and contain home price inflation. All these announcements have come within the last two days signaling an increased focus on economic revival.

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