The COVID shock continues to hit the Chinese economy hard as cases fall:
There are 1037 words left in this subscriber-only article.
Get your first month for $1
Especially in property:
More help is coming. Goldman:
Bottom line: At the Central Financial and Economic Affairs Commission meeting on April 26th, President Xi called for stepping up infrastructure construction, especially on transportation, energy, water conservancy and “new infrastructure”. He emphasized both economic returns and “overall returns” of infrastructure projects, reiterated the need to appropriately advance infrastructure investment, and pledged to better meet the financing demand for infrastructure investment. The meeting adds conviction to our views that funds are less of a constraint for infrastructure investment this year. It also suggests policymakers are working to resolve potential bottlenecks from project pipelines and local governors’ incentives. We expect infrastructure investment to remain elevated at double-digit year-on-year growth incoming two quarters on frontloaded local government special bond (LGSB) issuance and favorable credit policies.
Is that bearing out? Yes. But headwinds remain. LGFV’s still have annual caps to borrowing so they can bring forward projects but not exceed last year’s spending. Needless to say, this is a boost measured in quarters not years.
And land sales are still falling fast, denuding local governments of other income so in some sense this is only an offset.
Plus, OMICRON lockdowns do not discriminate and stalled export growth will end the FAI boom in manufacturing.
The fact is, more infrastructure only slows the decline unless or until the property, OMICRON and export busts end.