China Economy Commodities Iron ore price

Can China’s infrastructure drive save metals?

Thursday 15 September 2016

From Macquarie

 Infrastructure spending and property investment have been the two key drivers for China FAI and also metal demand growth this year. Property investment growth peaked in Q2, meaning infrastructure spending has become the lone engine for FAI growth most recently. However, even this has shown signs of weakening. Thus it is thus not surprising that NDRC issued a notice two weeks ago on “encouraging financial institutions to support infrastructure PPP” and the Standing Committee of State Council emphasized the use of PPP to drive up infrastructure FAI in its meeting last week. This clearly forms a key part of their strategy to underpin growth through 2017.

 By the end of June there were 9,285 PPP projects with total planned investment of Rmb10.6Tn that have been recorded in its database, of which only Rmb1Tn of projects were in implementation stage (construction), less than 10%. As shown by Fig.4, if we include PPP projects in preparation and raw material purchase stages, it brings the total investment up to Rmb4.08Tn, accounting for 38.5% of total planned investment.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.