JUST OVER 25 years ago Shanghai launched its subway with a single, stubby line. Since then it has added 15 lines and some 700km, making it the world's longest metro system. It's far from done. The city recently unveiled plans for another 300km, including overland rail, within five years. Much of the work proceeds as machines drill tunnels beneath the surface. But excavation holes around the city offer about the activity deep underground.
They are part of a nationwide push. The Chinese government has, in the words of state media, hit the "fast-forward button" on infrastructure spending, and tried and tested way to the economy. In the first quarter China's GDP grew by 6.4% compared to a year earlier, level with the final quarter of 201
widely heard. The trade seemed to be destined to become a nastier. China's stock market was slumping. Entrepreneurs complained that state-owned firms were already powerful. A regulatory campaign in debt levels sent tremors through the financial system, making banks much warier about landing cash.
So in mid-2018 China's government shifted gears. The cut taxes on personal income and corporate profits. Authorities ordered banks to lend more to small businesses. And planners cranked up the infrastructure machine again. For months they had managed to get under the metro projects, mindful of the campaign to control debt. But in July they started moving again, with half and dozen cities, including Shanghai, among the beneficiaries. Sales of excavation equipment, a proxy for construction, so to eight-year quarterly high in the first three months of 2019 (see chart).
Li Keqiang, the prime minister, has repeatedly sworn off any major stimulus, fearful or undoing the progress made in slowing the growth of debt. Benefits from cutting taxes have been blunted by the efforts of more stringently.
It aims to build 3,200km or high-speed rail lines this year. That is almost as much as Spain, the country with the second-largest high-speed rail network, has in total; for China, though, it is down from an average of 3,600km annually over the past five years. Nor need the government worry about a slightly economy causing unemployment: with the labor force shrinking as the population, help-wanted ads are popping up in shops across the country.
been taken aback by the strength of credit growth this year. Total social financing, a measure consisting mainly of bank loans and bond issuance, hit 8.2trn yuan ($ 1.2trn) in the first quarter, up by 40% from the same period last year, well above most forecasts. A quarter of the financing has been short-term corporate loans. In China, it is usually a sign that is state-owned banks are the government's call to credit out, ahead of demand from borrowers. Growth could thus be rebounded by mid-year, says Larry Hu or Macquarie Securities.
More likely is the change is one of timing rather than magnitude. The government seems to be front-loading its plan to grow up.
Two political calculations may help explain this. The first is the trade war with America. China appeared to be on the back foot last year as its stock market tumbled. A rally this year, fueled by the pro-growth policy tilt, has boosted China's confidence as negotiations enter the home stretch. The second is the 70th anniversary of Communist Party rule on October 1st, which is the government will mark with a flurry of festivities. It does not want to marred by grumbles about the economy. The subway diggers can count on a busy summer.
Source link
