The Big Call

Investment to stay hot

  • Published 08 Apr 2010

A confluence of factors suggest that fixed asset investment in China will remain buoyant even after Beijing's official stimulus programme is phased out from late this year.

Many investors are concerned that the conclusion of China's Rmb 4,000bn ($586bn, €437bn, £385bn) stimulus package at the end of this year will indicate a roll-back of China's strong infrastructure investment – and therefore the main driver of economic growth. Such concerns stem from a misreading of the dynamics of the infrastructure spending boom. The impetus behind the surge in spending on roads, railways, ports, airports, water treatment, environmental upgrades and many other types of infrastructure from early 2009 always derived more from local government ambition than from central government fiat. What happened in early 2009 was not so much that Beijing ordered local governments to invest, but that it gave its license to local governments that were already straining to launch a series of infrastructure projects.

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