In an effort to kick start China’s waning economy, the government of Chongqing, an industrial centre in China’s southwest, will invest 1.5 trillion yuan over seven areas including cars, electronics and petrochemicals over the next 3 years.
This brings to 5, the number of Chinese cities to announce major investment plans as they try to stimulate economic growth that has slowed steadily this year.
The others are Changsha in central China, Guangzhou in the south and Nanjing and Ningbo in the east. Those city-level initiatives should help to drive an economic rebound before the end of the year, economists said.
China’s economic growth slowed to a three-year low of 7.6% in the quarter ending in June despite government stimulus efforts. The International Monetary Fund is forecasting 8% growth for the year but revenues for some companies in industries such as shipbuilding are down 50%.
Beijing has had 2 interest rates cuts since the start of June and is pumping money into the economy through higher investment by state companies.
Premier Wen Jiabao said last week China should meet its economic targets this year but warned “economic hardships” may continue for some time. The Communist Party’s growth target this year is 7.5%, above the low single-digit levels of the US, Europe and Japan but painful for Chinese companies that are used to high growth.
Authorities are resisting calls for more aggressive action after their huge stimulus in response to the 2008 global crisis fueled inflation and a wasteful building boom.
Plans in Chongqing call for creating seven industrial clusters with investment of at least 100 billion yuan ($16 billion) and 30 more with at least 10 billion yuan ($1.6 billion).
There was no indication how much of that investment might be part of earlier plans that were being re-announced in an effort to bolster public confidence and encourage private sector spending.
Some analysts have cautioned that some of the announced spending may not be carried out because projects still require approval by regulators in Beijing who are wary of encouraging unneeded investment and adding to excess production capacity in some industries.
The government-led investment also might set back efforts to nurture domestic consumption and reduce reliance on exports and investment in a shift economists say is needed to keep incomes and living standards rising over the long term. RTE News