Almost all of China’s provincial governments that have announced their budgets intend to increase spending on large construction and infrastructure projects this year.
According to analysis by news agency Bloomberg, this amounts to a $1.8 trillion year-on-year boost, and is aimed at helping regional economies recover from two years of pandemic restrictions.
The new projects will span the sectors of transport, energy and industrial parks, and will amount to a 17% increase in capital investment.
This view was reinforced by the publication of an index that showed construction activity in March rose to its highest level in more than a decade.
Regions with particularly large pipelines include the central province of Henan, which plans to increase spending by nearly 50% this year to $290bn. Only one province – Zhejiang in the east – announced a fall in spending.
However, 10 of mainland China’s 31 regions didn’t make their targets public, so the total picture for the country is incomplete.
The greenlighting of projects signals a return to investment as a way of stimulating economic activity, rather than relying on increases in consumer spending and the growth of the services sector.
According to Bloomberg, the investment shows a focus on high-tech manufacturing and renewable energy, underlining Beijing’s move to increase technological self-sufficiency and energy security in the face of its growing rivalry with the US.
For example, Henan will spend $145bn on “industrial transformation” projects, whereas water and road schemes will receive $58bn.
According to rating agency Fitch, China will continue increasing the deployment of renewable power in 2023 after the installation of wind and solar power capacity rose 22% in 2022 on strong demand, lower raw-material costs and a low-base effect for wind power.
Solar panel installations rose 59% to 87GW in 2022, according to China’s National Energy Bureau. The surge was largely driven by elevated coal prices, which made solar power more attractive.
Meanwhile, Reuters reported in December that China is planning a $145bn support package for its semiconductor industry.
The International Monetary Fund projects China’s total government debt, including debt of local government financing vehicles, will rise about 12 percentage points to 123% of gross domestic product this year, and corporate debt will increase four percentage points to 117% of GDP.