Editorial
August infrastructure investment released a rebound signal
Seetao 2021-09-16 14:30
  • It is expected that the special debt quota for post-installation in 2021 will be completed within the year
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Affected by the 2020 base number, the growth rate of narrow infrastructure investment continued to fall in the first eight months, but aside from the base effect, the growth rate of narrow infrastructure investment in a single month initially stabilized in August, and the growth rate of general infrastructure investment rebounded as scheduled, and it will be more obvious in the fourth quarter. Affected by natural disasters such as the epidemic and floods, the downward pressure on the economy has increased. In order to underpin economic growth, investment in infrastructure construction (hereinafter referred to as "infrastructure") has begun to exert force.

On September 15, the National Bureau of Statistics released data showing that from January to August, infrastructure investment (excluding electricity, heat, gas and water production and supply industries) increased by 2.9% year-on-year, and the two-year average growth rate was 0.2%, compared with 1-7. The month fell by 0.7 percentage points.

Infrastructure-related high-frequency indicators bottom out and rebound

Gao Ruidong, chief macro economist of China Everbright Securities, analyzed the above-mentioned narrow infrastructure investment growth rate in the first eight months compared with the previous seven months, mainly due to the gradual increase of the base in 2020. The growth rate of narrow infrastructure construction from January to July 2020 is -1%, and the growth rate of narrow infrastructure construction from January to August is -0.3%. The base figure gradually rises, putting pressure on 2021 year-on-year.

Wang Jingwen, a macro analyst at the Minsheng Bank Research Institute, also told China Business News that the decline in infrastructure investment growth in the first August was mainly due to the 2020 base. Regardless of this factor, there are preliminary signs of stabilization in infrastructure investment in a single month in August. The two-year average growth rate of infrastructure investment in a single month in August rebounded slightly from -1.7% to -1.6%.

Compared with the above-mentioned narrowly-defined infrastructure investment, the broad-based infrastructure investment includes electricity, heat, gas and water production and supply industries, and the broad-based infrastructure investment can better reflect the situation of infrastructure investment.

Gao Ruidong's team calculated that the growth rate of general infrastructure investment rebounded as scheduled, and the general infrastructure investment growth rate in August was 0%, slightly higher than the -3.1% in July. Specifically, the major boosts to infrastructure growth in August were the electric heating, gas and water industries, and railway investment.

Gao Ruidong believes that infrastructure has rebounded as scheduled, mainly due to the acceleration of the issuance of local government special bonds. Special bond issuance increased slightly in August, with 489.6 billion yuan in new special bond issuance, up from 340.4 billion yuan in July and 430.3 billion yuan in June.

At the moment when the hidden debts of local governments are curbed, the issuance of urban investment bonds has become stricter, and local government infrastructure investment is more dependent on local government bonds for financing, especially special bonds. The issuance of special bonds in the first half of the year was significantly slower than in the previous two years, and was considered by the market to be one of the main factors contributing to the sluggish growth of infrastructure investment.

The July 2021 Politburo meeting proposed that the progress of budgetary investment and local government bond issuance should be reasonably controlled, and the physical workload should be formed at the end of 2021 and early next year. The executive meeting of the State Council in August called for strengthening cross-cycle adjustments and making good use of local government special bonds to drive the expansion of effective investment. In the second half of the year, especially since August, the progress of bond issuance has accelerated significantly. From September to December, there will be about 1.6 trillion yuan in new special bonds to be issued.

Gao Ruidong predicts that starting from September, the growth rate of infrastructure construction will continue to rebound. In the fourth quarter, the year-on-year growth rate of general infrastructure in a single quarter is expected to rebound from -3.8% in the third quarter to 8%. The cumulative annual growth rate is 4.3%, corresponding to a two-year compound growth rate of 3.9%.

Luo Zhiheng, chief macro researcher of the Yuekai Securities Research Institute, believes that with the subsequent acceleration of fiscal expenditures and special bond issuance, infrastructure investment is expected to stabilize and rebound.

He suggested that in terms of infrastructure investment, it is necessary to speed up the implementation of the investment plan that has been issued in the central budget, make preparations for special debt projects, ensure that the special debt is put into use in time after the issuance, and form a physical workload as soon as possible. Deploy and promote the implementation of major engineering projects identified in the "Outline" of the "14th Five-Year Plan", accelerate the advancement of quantum information, scientific and technological research and other major research projects that will lead future development, and become a world symbol in infrastructure fields such as the Sichuan-Tibet Railway and the downstream hydropower development of the Yarlung Zangbo River. Important livelihood security projects such as sex engineering, old-age care, and childcare.

Wang Jingwen believes that infrastructure investment has shown signs of bottoming out in August, but the follow-up development still needs to pay attention to capital and project conditions. Taking into account the debt pressure of local governments and the high requirements of special debt for projects, it is expected that infrastructure investment will rebound, but still It is a state of "trusting but not lifting". Editor/Xu Shengpeng


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