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October 19, 2015

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Infrastructure spending key to stability in GDP growth

INCREASED infrastructure investment is key to stabilizing China’s economic growth, a top state advisor said yesterday, while calling on the central bank to lower the cost of financing for companies and increase overall credit.

“Keeping relatively high growth of infrastructure investment is key to stabilizing economic growth” since property and manufacturing investment remains weak, said Yu Bin, head of the micro economy research department at the State Council’s Development Research Center.

China needs to speed up its 172 hydropower projects, develop 53 million hectares of high-standard agricultural land and lift investment in rural roads, Yu said.

His comments, coming a day before the government is due to release third-quarter gross domestic product growth figures, were published in the government-owned Economic Daily yesterday.

Many economists expect China to report that July-September economic growth fell below 7 percent for the first time since the global financial crisis.

Premier Li Keqiang said on Saturday that with the global economic recovery losing steam, achieving domestic growth of around 7 percent is “not easy”.

President Xi Jinping also acknowledged “concerns about the Chinese economy” but sought to allay them in a written interview with Reuters.

The government has taken several measures in recent months to accelerate construction investment, in part by attracting private financing through the increased used of public-private partnerships.

The Ministry of Finance in September published details for 206 proposed PPP projects, worth a total of 659 billion yuan (US$104 billion), including an expressway in Beijing.

The ministry last month also launched a 180 billion yuan fund with China’s biggest banks and financial institutions to invest in PPP projects.

Yu also called for the central bank to be alert to macro-economic adjustments, lower the cost of finance for companies and allow for credit growth, while maintaining a prudent monetary policy.

“Given the short-term rising downward pressure, it does not benefit China’s structural adjustment if economic growth is too slow or too fast,” he said.

China has already launched several measures to drive economic growth since late 2014, including cutting interest rates five times since November and lowering bank reserve requirement ratio.


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