China will fast track approvals for infrastructure investment to combat a slowdown in the economy, a state-backed newspaper reported on Tuesday, showing how Premier Wen Jiabao's call for policies to support growth is being put into action.
The pace of investment in the likes of roads, bridges and real estate is running at its weakest in nearly a decade, April data showed, suggesting the world's second-biggest economy is heading for a sixth straight quarter of slowing growth.
To provide some support the government had asked for project proposals by the end of June, even for those initially earmarked for the end of the year, said the China Securities Journal, one of the country's top financial papers.
Citing government sources, the article said Beijing did not rule out bringing forward next year's projects, if it thought more investments would be needed to stimulate the economy.
"This would be the first concrete evidence that Premier Wen's comments are being put into practice," said Dariusz Kowalczyk, an economist at Credit Agricole-CIB in Hong Kong.
"Improved China growth would benefit all regional currencies, as their economies heavily depend on exports to China."
The newspaper also cited media reports saying the central government will speed up budget allocations to various construction projects, including highway construction.
News of Beijing's latest efforts to bolster growth lifted stock markets. Australian shares rose 1.2 percent and Britain's FTSE 100 gained 1.1 percent as investors bought miners on the prospects of more sales to China.
Chinese infrastructure stocks outperformed, while benchmark copper prices rose to a one-week high.
To be sure, some economists say the slowdown does not warrant the mammoth 4 trillion stimulus China produced at the height of the global financial crisis when firms had axed some 20 million jobs as global trade ground to a halt.
The economy is stronger that it was then. Today's labor market is tight, wages are rising and employees are struggling for staff, conditions that could fuel inflation if Beijing loosened policy aggressively.
So the latest move by Beijing is another example of its "fine tuning" of policies to prevent the economy for slipping too quickly, they said.
HIGHWAYS, RAILWAYS, POWER
Wang Jun, an economist at the China Centre for International Economic Exchanges, a government think-tank, said he expected the thrust of the investment to focus on highways, railways, nuclear power and thermal power plants.
"But it will be fine-tuning," Wang said. Indeed, the China Securities Journal said Beijing would focus on projects already under construction or ones that were halted due to funding shortages last year.
Economists also said they doubted the government would look at fresh investment projects. Instead, it would bring forward projects laid out under the national five-year development plan.
Premier Wen signaled Beijing's willingness to take action in remarks at the weekend.
"We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth," he said in comments reported by state news agency Xinhua.
The China Securities Journal said that Beijing's move is partly aimed at offsetting the economic impact of a government-engineered slowdown in the property sector.
Wen reiterated at the weekend that Beijing would maintain a clamp-down on the sector. A series of controls on credit and purchases drove down housing prices in April for a second month in a row compared with year-earlier levels.
China bringing forward investment projects would also be welcome news for the world's mineral producers, particularly those in Australia.
The slowdown in China's economy has weighed particularly hard on the commodities market. Falling prices combined with escalating costs that have squeezed cash flow prompted big miners BHP Billiton and Rio Tinto to say they were reconsidering the pace of their long-term expansion plans.
However, Xstrata said on Tuesday it expected Chinese copper demand to pick up in the second half of the year and Brazilian miner Vale said it was selling iron ore to China about as fast as it can mine it.
Bringing forward investment projects would add to other evidence of government efforts to support the economy.
Under a "proactive fiscal policy", central government spending rose 26 percent in the first four months of 2012 from a year earlier, more than twice the pace of revenue growth.
The last time spending outpaced revenues in the first four months of the year was in 2009 when China rolled out its big stimulus package to counter the global recession. Spending on transportation is up 84.5 percent in the first four months of 2012.
Industrial production growth weakened sharply in April from a year earlier and retail sales were lower than expected. Fixed asset investment rose 20.2 percent in the first four months of the year compared with the same year-earlier period, the weakest pace since December 2002.
After the disappointing April economic data was released, the central bank cut the amount of cash banks must hold in reserve for the third time since November.
China may also roll out a new round of subsidies for energy-saving home appliances as early as June, the China Business News reported last week.
A Reuters poll showed economists expect annual economic growth in the second quarter of the year to slow to 7.9 percent, the first slide below 8 percent since 2009. It would represent the sixth straight quarter when annual growth slowed down.
China's economic growth averaged more than 10 percent in the first decade of this century. But Wen has said China must embrace a slower rate of growth and political reform to keep the economy from faltering and to spread wealth more evenly in the country of 1.3 billion people.
Source: www.reuters.com
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