China finds that spending on large fines is a road to nowhere
China finds that spending on large fines is a road to nowhere
TIANJIN, China. Beijing is trying to quit its habit of using high-cost infrastructure spending to boost the economy, a turning point in a growth model that has left many Chinese cities adorned with empty skyscrapers and underutilized roads.
China boosted economic growth for decades by pouring billions of dollars on roads, factories, railroads and more, and doubled to protect the economy from the global financial crisis of the last decade.
Now the torrent has diminished as The debt skyrocketed and unnecessary projects flourished..
"Policy makers realize that the old model can not continue," said Lian Ping, chief economist at the state-owned Bank of Communications Co. "Consensus has been formed and policies are moving in line with this idea."
Premier Li Keqiang said at a recent meeting of the State Council that relying on the investment was an "old road" and said that the new construction should be limited to the necessary projects. Instead, officials have initiated a series of tax cuts to help stimulate growth, and the central bank has refrained from cutting benchmark interest rates, while lowering the ratios of bank reserve requirements to make sure the loan continues.
That does not mean that China is ready to completely abandon the big projects that drive growth. When the data published on Friday showed an economy. Growing at its slowest pace in a decade., the legislators tried to calm the investors who fear the commercial fight with the United States. hit the Chinese exports in the next months. Investment in fixed assets still accounts for about one third of China's GDP growth, and remains a fast and attractive option for officials concerned about the meeting growth goals set from above.
"They can not stop doing this because they have a political commitment," said Anne Stevenson-Yang, co-founder of J Capital Research in Beijing.
But policy makers are reluctant to repeat style spending on the substance of the past. Many major projects, including China's major highways and high-speed networks, are complete, and not all have stimulated the economy beyond the initial outlay.
"Sooner or later, Chinese cities will have to exploit some tall buildings," said Chen Gong, president of Beijing Anbound Information, an independent Chinese think tank.
Here, in the northern port of Tianjin, a short trip by high-speed train from Beijing, exhibits the excess infrastructure fed by the state.
The tall empty buildings surround a new hotel in the financial district of Yujiapu, in the new Binhai area of Tianjin.
Photo:
Chao Deng / The Wall Street Journal
The city of 15.6 million inhabitants has seven high-speed rail stations, a subway system in the center of the city and a free zone on the river that cost billions of yuan (hundreds of billions of dollars) to build in the first half of the decade.
The fringes of the riparian zone, the Binhai New Area, remain empty.
"The construction of the city has been going on for years, but there still does not seem to be enough people and energy here," said Lui Ruihan, a 23-year-old Binhai resident.
Ms. Lui said she enjoys the quick bus ride from her home to downtown Tianjin, thanks to a highway that opened in 2010. But like many young people here, she is looking for opportunities elsewhere, even in Beijing. , which often beats Tianjin in the Contest for new residents and companies.
Earlier this year, the Tianjin government said the city was suffering "the mentality of a planned economy."
Elsewhere, high-profile liabilities include a museum in the form of a bag of metallic beans in Ordos, Inner Mongolia, which has not yet attracted visitors as officials expected, and An industrial project of $ 91 billion. in the deep-water port of Caofeidian, which increased the levels of local debt and stagnated.
Beijing has tried to turn the corner on waste spending. After a national program of public-private partnerships that sought to stimulate development became a fast track for local governments to approve and finance projects, Beijing initiated a clean-up of the program a year ago: more than 2000 projects have been refined since then, according to the Beijing Bridata Technology Co. investment tracker
In July, China adjusted the approval criteria to build metro and light rail lines; it is possible that more than a dozen cities with previously approved metro plans do not meet the new requirements, estimated Moody's Investors Service.
Liu Shijin, advisor to China's central bank and vice chairman of the government's China Development Research Foundation, argued in an August trial that investment in infrastructure and property had peaked, and trusting them to boost the economy It would increase China's debt problems.
Official data show that China's growth in fixed asset investment has been declining for almost a decade. This summer, the pace of investment slipped to its slower in a quarter of a century, decreasing to 5.3% from a maximum of 33% in 2009.
China can be expected to continue investing while Beijing redirects spending to President Xi Jinping's signature initiatives, which include alleviating poverty, environmental cleanup and the development of remote areas, said Yanmei Xie, analyst at Gavekal consultancy. Dragonomics. Mr. Xi also wants to create a northern metropolitan region encompassing Beijing, Tianjin and Hebei Province, including the construction of a satellite city, Xiongan New Area.
But Ms. Xie and many other analysts do not anticipate a complete cut in spending. Investment in infrastructure could grow in low single digits, compared to 15% to 20% growth since 2012, he said.
In Tianjin, you can not undo the past. The years of unbridled development have yet to transform the city into a northern version of Shanghai or Shenzhen.
Yang Liansheng, a retired fisherman, makes two daily walks, passing through the empty buildings of Binhai and the dusty construction lots. It has no use for them, he said, even though Tianjin officials moved him and his wife to a nearby 32-story apartment block seven years ago.
"The change has been too big," said the 59-year-old man, pushing his bicycle down the waterfront of the Hai River.
Retired fisherman Yang Liansheng now lives near a series of empty buildings in Binhai.
Photo:
Chao Deng / The Wall Street Journal
-Liyan Qi contributed to this article.
Write to Chao Deng in Chao.Deng@wsj.com
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