Beijing News: Beijing sets up $120 billion credit line to boost infrastructure
Growth has slowed sharply in recent months as Communist leaders stick to a strategy of eliminating virus clusters with mass testing and lockdowns – forcing factories to halt work and block supply chains. supply.
Li Keqiang last week called for a “reasonable” expansion in the second quarter as fears grow for the official annual growth target of around 5.5%.
Pumping the priming of hard-hit provinces with infrastructure programs has become a key tool to create jobs and spur growth in local economies flattened by the virus and a simultaneous collapse in revenue from land sales to developers.
A State Council meeting chaired by Li on Wednesday approved a colossal new sum for infrastructure.
“It is necessary to increase the credit line of political banks by 800 billion yuan ($120 billion),” state broadcaster CCTV reported.
Experts say the announcement is likely to help provincial governments match Beijing’s banner statements on support for growth.
“It will provide long-term support for various infrastructure projects,” Betty Wang and Zhaopeng Xing of ANZ Research said in a report released Thursday.
This, in turn, will “direct business activities throughout the supply chain”.
The amount represents “nearly half of the 1.65 trillion yuan in new strategic bank loans in 2021,” Nomura analysts added in a note.
The sum represented about a fifth of new medium- and long-term loans for the infrastructure sector in 2021, according to the note.
Nomura analysts estimate that Beijing has a six trillion yuan funding shortfall, partly due to a slump in land sales – a key source of funds – and due to the Omicron surge.
The latest virus outbreak was China’s worst since the pandemic began and caused its main business hub, Shanghai, to go into lockdown for two months.
While the city has since eased curbs as cases drop, a rebound will be gradual – businesses remain nervous about future surges and there is a huge backlog of goods at the port.