Wednesday 10 March 2010
Spending on infrastructure to decline to 212b yuan
Spending by Beijing on infrastructure - mainly railways, roads and airports - will drop 2.7 per cent to 211.8 billion yuan (HK$240.4 billion) this year, but the shortfall, especially for railways, is likely to be made up by non-government sources, experts say.
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Spending on infrastructure to decline to 212b yuan
Toh Han Shih
09 March 2010
Spending by Beijing on infrastructure - mainly railways, roads and airports - will drop 2.7 per cent to 211.8 billion yuan (HK$240.4 billion) this year, but the shortfall, especially for railways, is likely to be made up by non-government sources, experts say.
A top Chinese railway official said there should be no difficulty obtaining financing from non-central-government sources for the country’s huge railway budget, but the total spending on other infrastructure, such as roads and ports, is expected to decline or remain flat.
“Overall, the financial environment in 2010 is better than last year but remains very difficult,” the Ministry of Finance said on its website. “In 2010, the growth in the usable central government fiscal revenue is less, and central government expenditure will increase 6.3 per cent this year from last year.”
However, general government expenditures “will be strictly controlled”, it added, with preference given to agriculture, education, social security, employment and housing.
In contrast to the cutback in infrastructure, spending in other areas will go up. Spending on education will rise 9 per cent to 216 billion yuan, social security expenditure is expected to increase 8.7 per cent to 358.2 billion yuan and funds for employment and the environment will jump 22.7 per cent to 141.3 billion yuan, according to the ministry.
The decline in central government [infrastructure] spending would have little impact on railway construction this year because it constitutes a relatively small portion of the total rail infrastructure spending this year of at least 700 billion yuan, Zheng Jian, the Ministry of Railways’ chief planner, said.
“There should be no difficulty in financing railway projects,” Zheng said. “Railway spending must be protected. Railway construction must accelerate. Demand is far ahead of supply and it is still difficult for ordinary people to get train tickets.”
Even if central government spending is tightening, it is still possible to obtain funds for railway projects from other financing channels, such as equity markets, bonds and bank loans, Zheng said.
Responding to recent criticism, Railways Minister Liu Zhijun told the media last week that China’s high-speed railway is not a wasteful luxury, as it saves energy and is environmentally friendly.
Macquarie analyst Anderson Chow said: “You will see other major infrastructure projects being cut, including highways. Last year, China’s highway construction spending was 1 trillion yuan. It’s unprecedented ... it won’t be sustainable.”
Chow said spending on ports would be flat this year, because global shipping continues to suffer from the financial crisis. “The huge build-up of ports and highways in the early 2000 decade is coming to an end. It can’t continue.”
Macquarie forecasts China’s investment in highways to decline from 900 billion yuan this year to 734 billion yuan in 2011 to 607 billion yuan in 2012.
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