I have lost count of how many projects and how much have been announced by local governments in China after the central government’s priority turned to growth stabilisation.
First Financial Daily has a count for us: close to RMB20 trillion.
These investments, if they are ever going to be implemented, will be spent in 4 or 5 years, which would mean some RMB5 trillion every year.
Of course, this is unrealistic.
Yes, there has been some pick up in terms of infrastructure investments in the recent months, which should be positive for growth, although so far we do not think that the pick in infrastructure is able to offset the slowdown in investment in other sectors. And the key for having all these investments plans to be implemented are, first of all, whether the central government is willing to see a repeat of the 2008/09 stimulus, which was widely regarded as a mistake within the country, and secondly and relatedly, whether banks will fund them.
We wrote previously that loans approvals will be more important than projects approvals. This remains to be the case.