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Local Governments Lead Investment Charge
Summary:The amount of financing being ploughed into local projects is now almost as large as China's 2008 stimulus package.


Aug 8, 2012
Translated by Zhu Na


As the pace of economic growth in some areas of the country begins to slow and local governments are beginning to come under pressure on the unemployment and fiscal revenue fronts, more and more provincial governments are temporarily putting on hold plans to transform the structure of the economy and are instead turning to local stimulus packages to help speed economic growth.

Over the past two months, the total amount of planned investment for major projects launched by local governments across China has reached close to four trillion yuan, China Business News reported today.

In June, the Shaanxi provincial government put out ten policy recommendations aimed at maintaining economic growth, these included plans to fast track the initiation of several major infrastructure projects.

In the early July, the Guangdong provincial government also put forwarded similar measures aimed at maintaining a certain level of economic growth.

As part of the investment drive, Guangzhou, the capital of Guangdong, will push to see work begin on 101 major construction projects in the second half of 2012, investing 71 billion yuan. In addition, another 76 projects are being pursued by the city in partnership with state-owned enterprises, this should push the total investment plan in the city to over 200 billion yuan.

The city will also invest more than 140 billion yuan on expanding the Baiyun Airport and constructing seven new subway lines.

In July, the cities of Ningbo and Nanjing also launched policies that will bring forward major industrial and infrastructure construction projects.

On July 26, Changsha, the capital city of the central province of Hunan, announced that it will invest a total of 829 billion yuan on 195 projects in 2012.

A development plan aimed at boosting ecological and cultural tourism in the southwestern province of Guizhou, which is expected to be announced later this month, will also likely see dozens of major investment projects announced, with total investment predicted to come close to 3 trillion yuan.

The provincial government has also put forward a draft plan to pursue 10 national-level major projects, 50 provincial-level major projects and 200 provincial-level important projects.

However, given the size of these planned investments by local governments, many are asking about where the funding will come from.

This is especially true given that many local governments are seeing fiscal revenue growth slow and are also still dealing with the large amount of debt taken on during the implementation of the last 4 trillion yuan stimulus package which was rolled out between 2008 and 2010.

Take Guizhou Province as an example, which only collected 77 billion youan in general revenue last year. How will the government finance its planned three trillion yua investment spree?

Professor Tang Zhengren (汤正仁), vice president of Guizhou provincial committee party school, told China Business News that the three trillion yuan investment plan announced by Guizhou is still only in the planning stages and will be carried out over a 10-year period.

"The government is mainly playing a guidance role in the making of this plan ... it doesn’t mean government has this much money to invest."

According to Liu Shangxi (刘尚希), vice head of Research Institute for Fiscal Science of the Ministry of Finance, the investment plans by local governments will not be financed by governments, and local governments could not possibly afford this scale of investment. The key is for governments to lead private funds into the real economy and infrastructure construction.

Guangdong has a large amount of private capital that cannot find places to invest, how to guide private capital as it enters some fields, especially the monopoly areas that have been traditionally dominated by state-owned enterprises, will require the government’s active support and guidance, said Professor Chen Hongyu (陈鸿宇), executive vice president of Guangdong Society of Economics.

Links and Sources
China Business News: 地方重大项目投资总额两月内接近4万亿

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