China’s Xi Jinping has called for an “all-out” campaign to build infrastructure, according to state media, marking the latest attempt by leaders to boost growth in the Covid-battered economy.
Despite struggling to defeat the country’s worst outbreak in two years, the leadership is digging in its heels with a strict zero-Covid policy that involves lockdowns in the biggest cities and mass testing.
But the measures have snarled supply chains and hammered business morale, sending shockwaves through the global economy and markets.
“Infrastructure is an important support for economic and social development,” Xi said at a high-level meeting on Tuesday, according to the official Xinhua news agency.
And the Central Committee for Financial and Economic Affairs meeting added that China’s “infrastructure is still incompatible with the demand for national development and security”.
The meeting identified several sectors such as transport and energy where an infrastructure boost was needed, including the construction of ports and airports.
Recent lockdowns have clogged supply chains and transport networks — including in the economic dynamos of Shanghai and Shenzhen as well as the northeastern grain basket of Jilin.
But there were some signs of easing as officials said restrictions in hard-hit cities of Jilin and Changchun would “gradually lift” from Thursday after weeks of lingering restrictions.
City authorities laid out plans on Wednesday for most staff to return to work on top of an “orderly” lifting of traffic restrictions.
Fears have been growing of a lockdown in the capital Beijing, however, with large gatherings, group travel and weddings on hold in an effort to stamp out infections — squashing hopes of resurgent consumer spending over the five-day May holiday.
– Stocks rally –
Xi’s comments are the latest in a series of statements and steps aimed at boosting confidence in the economy and reassuring markets.
Shares in infrastructure firms rose Wednesday on the back of Xi’s comments, including construction company Sany Heavy Industry and China State Construction International.
Shanghai stocks rallied more than two percent.
China’s initial pandemic recovery was boosted by heavy infrastructure investment, following a tried-and-tested strategy of heavy building that fueled decades of runaway growth.
A major spending push, however, could also reignite debt worries.
After the 2008 financial crisis, Beijing launched a stimulus package worth hundreds of billions of dollars — including massive infrastructure investment — but that piled on the debt for local governments and state enterprises.
With risks to consumption and manufacturing exports, “initiatives to ramp up infrastructure spending are a direct policy tool to lift government spending,” said Rajiv Biswas, Asia-Pacific chief economist at S&P Global Market Intelligence.
But infrastructure is “not a quick fix”, cautioned Nomura chief China economist Ting Lu.
“Lockdowns make the task of ramping up infrastructure investment more difficult due to… travel bans and shortage of construction workers in… (affected) areas,” he told AFP.
It would also “be unrealistic to expect much faster infrastructure investment growth, and its pace… would only fill a small part of the gap left by slowing export growth, the large property sector contraction and the rising costs of China’s zero-Covid strategy “, Nomura said in a recent report.