Mr. Xi called for all-out efforts to build infrastructure

“Infrastructure is an important factor in supporting economic and social development,” Chinese President Xi Jinping said at a meeting of the Central Economic and Financial Commission on April 27, calling for promote public investment.

At the conference, China’s Central Economic and Financial Commission assessed that “infrastructure is still not compatible with national security and development needs”. Chinese leaders have identified the need to promote infrastructure projects in a number of areas such as transport and energy, including the construction of seaports and airports.

The statement was made by Mr. Xi in the context of China’s economy facing many difficulties due to the serious Covid-19 outbreak. Recent blockades in Shanghai, Shenzhen as well as the Jilin grain basket have congested China’s supply chains and transport networks.

Shares of construction companies jumped on April 27 after Xi’s speech. The Shanghai Stock Exchange Index rose more than 2%, although investors remained concerned about the outbreak in the city.

However, China’s “all-out” effort to build infrastructure has raised concerns about public debt. After the 2008 financial crisis, Beijing launched a stimulus package worth hundreds of billions of dollars, which included massive investments in infrastructure. Many of these projects cause large debts to local governments and state-owned enterprises.

“Innovations to increase investment in infrastructure are often a direct policy tool to lift public spending,” said Rajiv Biswas, chief economist for Asia Pacific at research firm S&P Global Market Intelligence, said.

However, Ting Lu, chief China economist at Japanese financial firm Nomura, warned that infrastructure was “not a quick fix” to the problem.

“The blockade orders make the task of increasing infrastructure investment more difficult due to the travel ban and shortage of workers in the affected area,” said Ting Lu.

Hong Hanh (According to AFP)