With everyone so focused on Europe, lots of folks have missed the huge infrastructure announcement spree in China.
Here’s Nomura Zhiwei Zhang on the latest series of project approvals…
The Chinese government announced on 5 and 6 September that it had approved 25 subway lines and 13 highway projects in June, July and August. Since April, it has also approved several other infrastructure projects including several airport and energy projects. The government also announced the investment amount approved for most of the projects, which total RMB848bn. We estimate the amount approved for all approved projects (including those for which the government did not announce a specific investment amount) totals about RMB1trn, which is 2.1% of 2011 GDP. The average construction time for these is estimated at four years.
We believe the decision for the Chinese government to intensively announce these projects over the past two days signals a significant change in its policy stance from the incremental and reactive approach to a more decisive and proactive approach. The government also announced that President Hu will give a speech at the APEC meeting on 7-9 September entitled “Promote infrastructure investment, achieve sustainable growth”. It is unusual for President Hu to highlight infrastructure investment in his speech at a high-profile international conference, and hence we believe it reinforces our view that government‟s policy stance has changed.
The Chinese market was up 3.7% last night, in a major turnaround from recent declines.
Add this to what we are seeing in Europe, and you’re talking about a serious tailwind for risk assets all around the world.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.