Chinese city plans huge spending

Regional plans will help the national economy rebound in the second half

14:26 August 21, 2012

Beijing: Tianjin announced a multi-year target of 1.5 trillion yuan ($236 billion) for industrial investment, joining a similar plan by Chongqing amid local efforts that may help reverse China’s growth slowdown.

Tianjin, in northeast China, plans the investment over four years in 10 industries including petrochemicals and aerospace, according to a report today in the Communist Party’s Tianjin Daily. Chongqing, in the southwest, will boost industrial investment to 1.5 trillion yuan in the five years through 2015, the official Xinhua News Agency said yesterday.

The spending builds on reports last month that Changsha city will invest 829 billion yuan in projects including an airport and subway lines while Nanjing and Ningbo will introduce measures to boost consumption. The regional plans will help the national economy rebound in the second half, after expansion slowed to a three-year low last quarter, according to Nomura Holdings Inc.

“There are further signs that policy stimulus continues to be focused on infrastructure spending and consumption measures,” Dariusz Kowalczyk, economist at Credit Agricole CIB in Hong Kong, said in a note today after Chongqing’s announcement. He said separately that while there is a risk of overcapacity, the local industrial-investment plans are likely to be “well coordinated” by national economic planners.

The Shanghai Securities News today reported that China may give 5,000 yuan in subsidies for each purchase of a diesel car under a government plan to reduce carbon dioxide emissions.

Investment Funding

The reports didn’t say how much of an increase the spending would represent over previous plans. Tianjin had fixed-asset investment of 751 billion yuan in 2011, while Chongqing’s totalled 763 billion yuan. Investment nationwide rose 20.4 per cent in the January-July period from a year earlier, while industrial production grew 9.2 per cent in July, below the median economist estimate of 9.7 per cent.

Bank lending and bond sales are likely to help fund the spending, Kowalczyk said. Tianjin Daily said the city will give preferential treatment to the industries through land and taxes.

Huang Qifan, Chongqing’s mayor, was quoted by the People’s Daily website today as saying the city will develop a “comprehensive, multi-channel, low-cost” financing system to support the industrial-investment plans. Huang said he hopes state money, private funds and foreign investors will join forces to finance projects.

Chongqing’s industrial investment plan will focus on building seven “big manufacturing industries,” including electronic information, automotive, equipment and parts manufacturing, oil refining, material and energy industries, according to Xinhua.

The electronic-information industry, which includes notebook computers, will receive 300 billion yuan in investment, while the car industry will get 200 billion yuan, Xinhua said.

Tianjin’s plan includes 500 billion yuan of investment in petrochemicals, 370 billion yuan in heavy equipment and 70 billion yuan in aerospace, according to the Tianjin Daily report, which was also posted on a government website. Other industries targeted include cloud computing, green energy and biomedicine.