China increases financial support for infrastructure projects – Xinhua
Aerial photo taken on Aug 19, 2022 shows the construction site of the Longli River Bridge in Longli County, southwest China’s Guizhou Province. (Xinhua/Yang Wenbin)
by Xinhua Writers Guo Xiaoyu, Hu Wenjia, Zhang Qianqian
BEIJING, Aug. 31 (Xinhua) — China is channeling more financial support toward infrastructure construction as part of national efforts to catalyze domestic demand and support economic recovery.
The new decision came as a State Council executive meeting announced last week that the quota for “policy-backed and development-oriented financial instruments” would be increased by an additional 300 billion yuan (about $43.6 billion) to better fund major infrastructure projects.
Previously, a total of 300 billion yuan had already been allocated through these instruments, namely two funds managed respectively by the China Development Bank (CDB) and the Agricultural Development Bank of China (ADBC).
FACILITATING CASH STRAIN
Introducing the operation of the instruments, Zhang Hui, executive vice president of CDB, said that the aforementioned fund managed by the political bank comes from several sources, including the issuance of financial bonds.
The fund contributes up to 50 percent of an infrastructure project’s seed capital, while the rest is financed by project initiators and social capital, Zhang said.
A case in point is a new expressway construction project in the eastern province of Zhejiang, where some 6.3 billion yuan was needed for base capital.
“Our early financial pressure was greatly eased with the 1.8 billion yuan from the CDB fund,” said Li Feng, chairman of the relevant construction company. Li said construction is expected to start next month with the rest of the financing in place.
Projects eligible for funding must have significant social benefits as well as economic returns, Zhang said. He pointed out that political banking tends to prioritize those incorporated into China’s 14th Five-Year Plan (2021-2025) and prepared for construction in the third quarter.
On the ADBC side, the bank said its fund has helped more than 500 infrastructure projects ranging from urban construction and transport to agriculture and energy.
It is estimated that the fund will generate a total investment exceeding 1 trillion yuan in these projects, according to the bank.
Along with policy assistance, a slew of commercial banks in China have recently launched tailored credit products to support infrastructure projects with more funding sources.
For example, the Industrial and Commercial Bank of China, one of the country’s four public lenders, announced earlier this month that it had approved loans worth around 37 billion yuan for eight projects. .
At the local level, governments are accelerating the use of special purpose bonds to stimulate investment. Data from the Ministry of Finance showed that in the first seven months of this year, 3.47 trillion yuan of such bonds were newly issued nationwide. In particular, those issued for the construction of projects have almost reached the annual quota.
Thanks to these multi-pronged efforts, China’s infrastructure investment grew 7.4 percent year-on-year in the January-July period, with the pace of growth accelerating for three consecutive months, data shows. from the National Bureau of Statistics.
“The robust growth momentum in infrastructure investment can be attributed to China’s acceleration of special purpose bond issuance in the first half of this year,” said Luo Guosan, an official with the National Development Commission. and reform.
Looking ahead, Luo said that as the implementation of policy-backed and development-oriented financial instruments accelerates in the third quarter, the investment expansion will be further enhanced.
Similarly, a recent research report by China International Capital Corporation also estimated that total infrastructure investment in 2022 could increase by 10% to 12%, boosting the nominal GDP growth rate by 1.2 to 1. .4 percentage points.
Investments in infrastructure are likely to give a stronger boost to the economy in September, and their multiplier effect will also increase, the report adds. ■