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China's construction boom in Q4 to support growth amid economic headwinds

Construction boom to support growth amid economic headwinds

2021/11/15 10:36:31   source:Global Times

China embarked on a construction boom starting in October as fiscal stimulus quickened and the issuance of special bonds accelerated, which analysts said will provide support for the country's fixed-asset investment - which has remained relatively flat - to buffer against rising headwinds in the fourth quarter and deliver stable and sound GDP growth for the whole year.

China is scheduled to release key economic indicators for October on Monday, offering a clue as to whether the world's second-largest economy has entered a steady phase of economic expansion after fallout from the initial widespread outbreak of the COVID-19.

While factory production may have slowed in October amid rising bulk commodity prices, a power crunch and the resurgence of COVID-19 outbreaks, consumption is poised to continue improving and fixed-asset investment is about to soar in the next month, analysts said.

They said that the October data will serve as a quick rebuke to some Western media outlets' hype about a slowdown in the world's second-largest economy that poses a threat for the global recovery.

Edging toward the end of 2021, a number of Chinese provinces in recent days have announced major infrastructure projects. South China's Guangxi Zhuang Autonomous Region unveiled a batch of major construction projects last week, with a total investment of 185.9 billion yuan ($29.15 billion). Those projects cover a wide range of sectors, including transportation, new energy, logistics and basic infrastructure.

Last week, Xi'an, capital of Northwest China's Shaanxi Province, inaugurated 100 power grid projects with a total investment of 65 billion yuan. Central China's Hubei Province held a launch ceremony for the fourth quarter in recent days, covering 805 projects worth 452 billion yuan.

"Investment will speed up in the fourth quarter as China has been ramping up fiscal policy support in a modest way, such as issuing more special bonds, to shore up an economy that is facing increasing internal and external pressures, although monetary policy does not show signs of easing," Hu Qimu, chief research fellow at the Sinosteel Economic Research Institute, told the Global Times on Sunday, highlighting a recent macro policy fine-tuning by the central government.

China's fixed-asset investment stalled in the third quarter. In the first three quarter, China's fixed-asset investment grow 7.3 percent, slowing 1.6 percentage points compared with the first eight months, according to data released by the National Bureau of Statistics (NBS).

As China's economic growth has been slowing in the second half of 2021 mainly due to the base effect, starting construction for a variety of infrastructure projects in the fourth quarter will help the country to smooth the average economic growth rate for the full year, Dong Dengxin, director of the Finance and Securities Institute of Wuhan University, told the Global Times on Sunday.

Projects landing at the end of 2021 will also allow companies to purchase equipment and facilities in the beginning of 2022, which will be a strategic deployment to help the world's second-largest economy transit to a new year and get off to a head start, Dong added.

The Ministry of Finance said in October that the issuance of local governments' special-purpose bonds had accelerated since August, and it is expected that the issuance will be fully completed before the end of November.

In the first three quarters, China's net special bond issuance reached 2.22 trillion yuan, accounting for 61 percent of the annual quota, data from the Finance Ministry showed.

Although weakened factory production has cast a shadow over the economy for October and the entire fourth quarter, analysts expect a boost to consumption due to the recently concluded Double 11 shopping festival as well as increasing demand for the upcoming New Year and the Spring Festival holidays.

"China's annual economic growth rate is still at the forefront of the world, and its economy and trade will continue to serve as major engines driving the global recovery," Dong said, adding that the country will have no difficulties meeting its yearly growth target of above 6 percent.

In the third quarter, China's GDP grew 4.9 percent on a year-on-year base, hitting a one-year low. 

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