The new measures announced by China’s cabinet on Wednesday amount to more than 1 trillion yuan ($146 billion) in funding to improve infrastructure, ease power shortages, and tackle drought, including money to secure rice production.
“The current economic recovery has a weak foundation,” the statement said, adding that the new funding was aimed at stabilizing the economy. Premier Li Keqiang hosted the cabinet meeting.
Beijing has tried to boost investment and consumption in the world’s second largest economy more than once this year. In May, the government announced 33 measures to revive growth.
Despite these interventions, the Chinese economy has deteriorated in recent months because of Covid lockdowns and a deepening property downturn. Analysts are also concerned about the impact China’s record-breaking heatwave and drought will have on growth. Already, several international businesses, including Tesla (TSLA) and Toyota (TM), have faced disruption at factories due to power outages.
Several major investment banks, including Goldman Sachs and Nomura, downgraded China’s economic growth forecasts for 2022 to 3% or under, as the heatwave hit industrial heartlands. This is way below 5.5% growth target that the Chinese government had set earlier this year.
China’s biggest focus remains infrastructure growth.
With the central bank’s support, state development banks can lend out $44 billion to finance infrastructure projects, the statement said. That’s on top of $161 billion already committed in June.
Local governments will also be permitted to issue $73 billion in debt to fund the building of roads, railways, airports, affordable housing and energy projects. That’s in addition to 3.5 trillion yuan ($511 billion) of bonds they were given permission to issue for the same purposes earlier this year.
Li also urged all government departments to “do a better job” in battling the drought and mitigating its impacts. He called for more wells to be drilled, and more drought-resistant water sources to be developed, in addition to seeding clouds, which China resorted to earlier this month to bring more rainfall to the Yangtze River.
“Priority should be given to ensuring people’s drinking water, and to transport and deliver the water when necessary,” Li added.