China’s mini-stimulus announced last week might have left global markets cold but Australia looks set to benefit from the increased spending on railway infrastructure.
The Shanghai Daily this morning reports that China is going to invest 720 billion yuan ($123 billion) in railways this year which is up 20 billion yuan ($3.5 billion) on the original plan, with the number of projects rising to 48 this year.
For Australian exporters, this is good news as more than 7,000km of track is going to be laid. Sheng Guangzu, general manager of China Railway Corp said: “By accelerating railway construction, (we) can increase the effective demand of steel, cement and other building materials while absorbing overcapacity,”
Demand for steel means demand for the iron ore and coking coal to make it, which should help alleviate any concerns that Chinese reforms mean demand for Australian exports will fall in a hole.
Indeed, the opening up of the Chinese interior and the economic development this is seeking to drive means demand should stay steady on the back of continued Chinese infrastructure building.