Cookie consent

We use cookies to improve your experience on this website. By continuing to browse our site you agree to our use of cookies. Tell me more | Cookie preferences

China unleashes $158B infrastructure spend

China approved $158 billion in new infrastructure spending, including railroad projects.

Story highlights

  • China has approved plans for Rmb1tn ($158bn) in infrastructure spending
  • The domestic stock market surged more than 4% in early trading on Friday
  • Analysts say investment push will help support growth in the stuttering economy
  • Amid slowdown, 'China's central government finally took real actions'

China has approved plans for Rmb1tn ($158bn) in infrastructure spending, an investment push that analysts say will help support growth in the stuttering economy.

The money will be rolled out over several years and the government has not described the investments as a stimulus package, but the announcements nevertheless fuelled renewed optimism about China's prospects.

The domestic stock market surged more than 4 per cent in early trading on Friday, reflecting the hope of investors that China could be on the verge of turning the corner after two years of consistently slower growth.

"With clear signs of a worsening slowdown of economic growth, China's central government finally took real actions," said Lu Ting, an economist with Bank of America Merrill Lynch.

China's growth fell to 7.6 per cent in the second quarter, its lowest in three years, and data in recent months has pointed to an even steeper slowdown this quarter. Economic indicators for August, to be published over the weekend, are expected to show sluggish industrial output.

    Just Watched

    China 'thirsty' for European wine

China 'thirsty' for European wine 03:05
PLAY VIDEO

    Just Watched

    Apple supplier progress in China

Apple supplier progress in China 00:59
PLAY VIDEO
Didier Drogba has signed for Shanghai Shenhua on a two-year deal.

    Just Watched

    Reversal of football fortunes in China?

Reversal of football fortunes in China? 02:12
PLAY VIDEO

Analysts had long predicted that the government would intervene with more fiscal spending and monetary easing to cushion the slowdown, but the nation's top leaders have been very cautious and have only made mild moves so far.

    Fear of overstimulating the economy, as happened in 2009, has been one major constraint. Officials also appear to have been preoccupied with politics as a once-in-a-decade leadership transition is set to take place later this year.

    In the announcements over the past two days, the National Development and Reform Commission, a top central planning agency, has approved 25 urban rail projects, 13 highway construction projects, seven waterway projects and nine waste water treatment plants. The total cost of the projects is estimated to be about Rmb1tn, or 2 per cent of gross domestic product.

    "We believe implementation of these projects will begin in the coming months, which will cause fixed asset investment growth to rise. The impact should start to be reflected in GDP numbers in the fourth quarter of 2012," said Zhang Zhiwei, an economist with Nomura Securities.

    Projects spearheaded by the NDRC are seen by analysts as much more credible spending commitments than those announced by a series of local governments in recent months.

    Local officials are keen to prop up growth, but they are struggling to find the means to do so, because their tax and land-sale revenues are flagging and they are effectively barred from borrowing money. By contrast, once projects have received the NDRC's stamp of approval, funding is usually a formality, with either banks providing the financing or the government arranging for bond issuances.

      CNN Business

    • An Iraqi worker adjusts a control valve at the Daura oil refinery on November 5, 2009 in Baghdad, Iraq. Iraq and a grouping of U.S and European oil companies Exxon Mobil Corp and Royal Dutch Shell PLC signed a $50 billion contract today to develop the West Qurna oilfield, two days after the Iraqi South Oil Company signed a technical service contract with Britain's BP and China's CNPC to develop the Rumaila oilfield. The Iraqi government is trying to attract foreign investment, especially in the oil sector, in hopes of reviving its war-torn economy. Iraq has the third largest oil reserve in the world but it is producing way below its potential. (Photo by Muhannad Fala'ah/Getty Images)

      Airstrikes, rebels seizing control of oil fields, plus a severe refugee crisis are a recipe for market panic. So why are Iraq oil prices stable?
    • A view of gloves and boots used by medical staff, drying in the sun, at a center for victims of the Ebola virus in Guekedou, on April 1, 2014. The viral haemorrhagic fever epidemic raging in Guinea is caused by several viruses which have similar symptoms -- the deadliest and most feared of which is Ebola. AFP PHOTO / SEYLLOU (Photo credit should read SEYLLOU/AFP/Getty Images)

      The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.
    • People enter a casino in Las Vegas, Nevada, on April 18, 2009. Las Vegas is the most populus city in the US state of Nevada and internationally renowned major resort city for gambling, shopping, fine dining and entertainment. Las Vegas which bills itself as the �Entertainment Capital of the World� is famous for the number of casino resorts and associated entertainment. AFP PHOTO/Jewel SAMAD (Photo credit should read JEWEL SAMAD/AFP/Getty Images)

      Macau has overtaken Switzerland in the wealth stakes, being named the world's fourth richest territory by the World Bank.
    • spc marketplace middle east ata atmar a_00010015.jpg

      Saudi Arabian Bateel brand is best known for its delectable dates but it now has more than a dozen cafes and a new bakery in the works.
    • Vantablack designed by Surrey NanoSystems absorbs 99.96% of all light. It however will not be the solution to the creating the world's ultimate slimming black dress! A dress made out of this material would render the curves and contours of the human body invisible and would leave the wearer looking like 'two dimensional cardboard cut-out.'

      A British nanotech company has created what it says is the world's darkest material. It is so dark the human eye can't discern its shape and form.
    • Jibo robot is designed to be an organizer, educator and assist family members. CNN's Maggie Lake met him and says she was impressed with his skills.
    • A picture taken on March 15, 2014 shows children playing at the sprawling desert Zaatari refugee camp in northern Jordan near the border with Syria which provides shelter to around 100,000 Syrian refugees. Syrian refugees in the seven-square-kilometre (2.8-square-mile) Zaatari camp in Jordan fear that President Bashar al-Assad's likely re-election this year will leave their dream of a return home as distant as ever. The brutal war in Syria between the regime and its foes shows no sign of abating and has killed at least 146,000 people since it erupted in mid-March 2011. And 2.5 million Syrians have fled abroad and another 6.5 million have been internally displaced. Jordan is home to more than 500,000 of the refugees.

      Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
    • SHEFFIELD, ENGLAND - NOVEMBER 18: Queen Elizabeth II wears 3 D glasses to watch a display and pilot a JCB digger, during a visit to the University of Sheffield Advanced Manufacturing Research centre, on November 18, 2010 in Sheffield, England. (Photo by John Giles - WPA Pool/Getty Images)

      At the last football World Cup, it was all about 3D. This time around, it's nothing less than 4K.
    • An Iraqi worker adjusts a control valve at the Daura oil refinery on November 5, 2009 in Baghdad, Iraq. Iraq and a grouping of U.S and European oil companies Exxon Mobil Corp and Royal Dutch Shell PLC signed a $50 billion contract today to develop the West Qurna oilfield, two days after the Iraqi South Oil Company signed a technical service contract with Britain's BP and China's CNPC to develop the Rumaila oilfield. The Iraqi government is trying to attract foreign investment, especially in the oil sector, in hopes of reviving its war-torn economy. Iraq has the third largest oil reserve in the world but it is producing way below its potential. (Photo by Muhannad Fala'ah/Getty Images)

      Iraq produces 3.3 million barrels per day and has the world's fourth-largest oil reserves. But the current crisis is putting all this in danger.
    • Valves of gas pipe-line are seen in the gas station not far from Kiev on March 4, 2014. The European Union will help Ukraine pay the $2.0 billion it owes to Russian gas giant Gazprom, a top official said Tuesday, as part of an aid package reportedly worth more than one billion euros. AFP PHOTO/ ANDREY SINITSIN (Photo credit should read ANDREY SINITSIN/AFP/Getty Images)

      The gas standoff between Russia and Ukraine could have a knock-on effect on Europe. Explore this map to find out why is the EU nervous.