Wednesday, August 22, 2012

Chinese city plans $240 billion in investment

BEIJING (AP) ? A major Chinese city has announced plans for $240 billion in industrial investments, adding to local spending initiatives that analysts say should help to reverse China's economic slowdown.

The government of Chongqing, a major industrial center in China's southwest, said in an announcement reported Tuesday by state newspapers that it will invest 1.5 trillion yuan in seven areas including autos, electronics and petrochemicals over the next three years.

It is the fifth Chinese city to announce multibillion-dollar investment plans as they try to stimulate economic growth that has slowed steadily this year. The others are Changsha in central China, Guangzhou in the south and Nanjing and Ningbo in the east.

Those city-level initiatives should help to drive an economic rebound before the end of the year, Nomura economist Zhiwei Zhang said in a report Tuesday.

China's economic growth slowed to a three-year low of 7.6 percent in the quarter ending in June despite government stimulus efforts. The International Monetary Fund is forecasting 8 percent growth for the year but revenues for some companies in industries such as shipbuilding are down 50 percent.

Beijing has cut interest rates twice since the start of June and is pumping money into the economy through higher investment by state companies.

Premier Wen Jiabao said last week China should meet its economic targets this year but warned "economic hardships" may continue for some time. The Communist Party's growth target this year is 7.5 percent, above the low single-digit levels of the United States, Europe and Japan but painful for Chinese companies that are used to high growth.

Authorities are resisting calls for more aggressive action after their huge stimulus in response to the 2008 global crisis fueled inflation and a wasteful building boom.

Plans in Chongqing call for creating seven industrial clusters with investment of at least 100 billion yuan ($16 billion) and 30 more with at least 10 billion yuan ($1.6 billion). There was no indication how much of that investment might be part of earlier plans that were being re-announced in an effort to bolster public confidence and encourage private sector spending.

Some analysts have cautioned that some of the announced spending may not be carried out because projects still require approval by regulators in Beijing who are wary of encouraging unneeded investment and adding to excess production capacity in some industries.

The government-led investment also might set back efforts to nurture domestic consumption and reduce reliance on exports and investment in a shift economists say is needed to keep incomes and living standards rising over the long term.

Source: http://news.yahoo.com/chinese-city-plans-240-billion-investment-054530841--finance.html

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