Everything You Need To Know About China's Massive Local Government Investment Plans

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Photo: Feng Li/Getty Images

Chinese local governments have unveiled a few massive investment initiatives to boost economic growth in the past few days. Unlike the infrastructure-oriented stimulus of 2008, these plans are focused on “technology advancement, industrial upgrade, environment protections, consumption boost and people’s livelihood improvement,” according to Morgan Stanley’s Helen Qiao.

And these plans will draw their funding from Beijing, local governments, or through bond issuance, rather than bank lending.

But before we look at whether these plans really are new, and how we can gauge their effectiveness, here’s a look at how big the plans are and what they focus on via Morgan Stanley:

Ningbo, July 20

The government implemented stimulus measures to boost the industrial economy. This also included plans for a fun that would bolster small businesses and support tax cuts for certain companies. The plan also aims to promote investment in large industrial projects.

Nanjing, July 23

The government announced a plan to support consumption, infrastructure, emerging industries. It also includes support for first time home buyers and for affordable-housing, purchase of motor vehicles. The plan is also intended to support tourism.

Guizhou Province, July 22

The government announced initiatives totaling 3 trillion yuan to support over 2,300 proposed projects tied to eco-tourism.

Changsha, July 26

Changsha’s 829 billion investment plan is intended to develop urban development, transportation and upgrade industries.

Wuhan, August 15

Wuhan announced a 233 billion yuan proposal on industry upgrading and its transportation system.


Photo: Wikimedia Commons

Guangdong province, August 20Guangdong’s 1 trillion yuan initiative is intended to boost an ocean economy, with 177 key construction projects.

Chongquing, August 21

Chongquing’s planned 1.5 trillion industrial investment plan under its 12th five year plan is centered on seven major manufacturing industries, namely, electronics and information technology, automobiles, advanced machinery, chemicals, new materials, energy and consumer products. The target industry output is expected to be 3 trillion yuan by 2016.

Tianjin, August 22

Tianjin announced plans to invest 1.5 trillion yuan in 10 industries over the next four years. Most of the plan is covered under its 12th five year plan and covers 10 industries. The industry output is expected to be 4.05 trillion by 2016.

Are these plans new and how can their effectiveness be tracked?

It’s important to remember that these projects are meant to be rolled out over a period of time and largely come from the local 12th five year program, which means they aren’t all new.

With the slowdown in China however, their newness isn’t really relevant according to Qiao. Rather, what’s important is whether governments can roll these out soon since they would “offset the headwinds from external demand deceleration”.

Moreover, Qiao writes that the governments’ fiscal expenditure growth, loan growth, the share of medium-to-long-term loans, and bond issuance should help keep track of funding.

Meanwhile, the effectiveness can be gauged from important economic indicators like FAI growth and produce price inflation. But it’s unclear if these initiatives will be able to offset the immediate slowdown.

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