>> preemptive infrastructure build-up <<
China's railway infrastructure investment may double in the second half of this year from the first six months, aiding efforts to reverse a slowdown in the world's second-biggest economy.
Full-year spending will be 448.3 billion yuan ($70.3 billion), according to a statement dated July 6 on the website of the National Development and Reform Commission's Anhui branch. That indicates about 300 billion yuan of investment in the second half, up from about 148.7 billion yuan in the first.
China's fixed-asset investment has already started to pick up and a jump in spending on railway construction would echo the stimulus rolled out during the global financial crisis. A decline in foreign direct investment reported by Vice Commerce Minister Wang Chao in Hong Kong yesterday underscored the toll that Europe's debt woes and austerity measures are taking on Asia's largest economy.
"China's stimulus may be stronger than the market has expected," said Zhang Zhiwei, a Hong Kong-based economist for Nomura Holdings Inc. who formerly worked for the International Monetary Fund. "There will be more positive signs in the coming months to confirm that China's pro-growth policies are taking effect."
Premier Wen Jiabao warned that the nation doesn't yet have the momentum for a stable recovery, the official Xinhua News Agency reported on July 15. Foreign direct investment dropped 3 percent in the first six months from a year earlier, Xinhua News Agency reported yesterday, citing Wang.
China's benchmark stock index fell to the lowest level in almost 3 1/2 years yesterday, as concern about slumping profits overshadowed speculation the government will do more to support growth. The Shanghai Composite Index slid 1.7 percent.
The document posted on the Anhui provincial website indicates that the government increased its railway investment plan for the year by 9 percent from the previous 411.3 billion yuan. It cited the railways ministry for the information. Seven phone calls by Bloomberg News to offices of the railways ministry went unanswered yesterday.
In 2009, spending of 600.6 billion yuan on railway infrastructure was part of stimulus that spanned low-cost housing, roads and earthquake reconstruction work. The nation is still digesting the consequences of that investment boom, including risks to banks from loans to local-government investment vehicles.
The China Securities Journal reported yesterday that the State Council may hold a meeting as early as tomorrow to set the tone for monetary and fiscal policies after the economy grew 7.6 percent in the second quarter, the least in three years.
"It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established," Wen said during an inspection tour in the southwestern province of Sichuan, according to a Chinese-language report from the official Xinhua News Agency.
In a sign of stresses in the Chinese economy, more than 2,000 Hong Kong-owned factories in the Pearl River Delta may close this year as export orders fall and wages rise, a business association said yesterday.
Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, gave the estimate in a phone interview after Ming Pao Daily earlier reported his comments. The organization's members have garment, watch, toy and footwear factories in the export hub of Guangdong.