China plans another multibillion-dollar spending spree

Beijing announces plans to boost infrastructure investment despite debt crackdown and escalating trade tensions with the US

It appears the best way to avoid a debt trap is to keep on spending. At a meeting of the State Council, the de facto cabinet of the Chinese government, plans were rolled out to make infrastructure investment a “priority.”

Senior Communist Party officials, including Premier Li Keqiang, agreed last month on a pro-growth package of policies with 1.35 trillion yuan (US$197 billion) earmarked for infrastructure projects across the country.

How this squares with President Xi Jinping’s two-year war on excessive borrowing by corporations, local governments and consumers was not revealed. But it looks like a cooling economy and the threat of escalating trade tensions with the United States have prompted the move.

“There will be no great flood of strong stimulus [but] fine-tuning according to the situation to [cope] with the uncertainty of the external environment,” a State Council statement said.

Earlier this week, China’s General Administration of Customs reported that exports jumped last month despite fresh Washington tariffs.

Trade surplus

Shipments destined for the US climbed 13.3% to $41.5 billion, compared to the same period in 2017, on the back of a similar rise in June. At the same time, the trade surplus increased by 11% to $28 billion. Last year, the US trade deficit with China was a record $375.2 billion.

Still, sections of the economy are showing signs of slowing. Factory activity has dipped while retail sales are starting to stall because of higher prices.

Figures released by the National Statistics Bureau on Wednesday showed that sales at 50 leading Chinese retailers dropped by 3.9% in July compared to the same period last year. Home appliance groups were the biggest losers with sales plunging 9.9%.

nning to boost infrastructure spending. Photo: iStock

Categories: Business, China

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