BEIJINGâ€"China has significantly accelerated approvals for new investment projects by companies and local governments, part of a campaign to support growth in the world's second-largest economy.
The investment projects range from new steel mills to hospitals and water treatment plants to clean-energy projects.
In the first four months of the year, China's economic planning agency, the National Development and Reform Commission, has approved more than twice as many investment projects as it did in the same period a year earlier, an analysis by The Wall Street Journal reveals.
Beijing is pulling various levers, from tax cuts to special purchase incentives for household appliances, to jump-start economic growth, which has slowed markedly. First-quarter gross domestic product was up 8.1% from a year earlier, compared with growth rates of 8.9% in the fourth quarter and 9.2% for the whole of 2011. A spate of weak data on measures from bank loans to exports confirmed that the slowdown continued in April.
Any boost to China's economy will be welcome to investors world-wide, who have come to depend on China as a driver of global growth. Stock markets from Hong Kong to South Korea to Australia finished higher on Tuesday, partly due to expectations for more China stimulus. European markets were mostly higher in afternoon trading.
The support measures have echoes of China's response to the global financial crisis in late 2008 and early 2009, when it unleashed a massive stimulus centered on infrastructure and investment projects, funded by state-owned banks. Beijing initially valued the package at about four trillion yuan ($630 billion), though analysts say that the total amount of spending was ultimately significantly greater, as local governments and companies spent liberally.
But Chinese government researchers, and an analysis released on Tuesday by the state-run Xinhua news agency, say China will likely be more conservative this time around, out of concern that too much investment could worsen overcapacity in some sectors and that its banks can't afford a second lending binge. Credit Suisse, in a note to clients on Monday, forecast that the investment will ultimately total about one trillion yuan to two trillion yuan.
"I am very concerned that if people are worried about the economy and controls are loosened, then everyone will be able to get loans and all projects will be approved. Then we would be back to an old path," said Pan Jianheng, vice director of the Economic Monitoring Center at China's National Bureau of Statistics. "What China should promote now are sectors that we have been wanting to develop for a long time, such as water conservation, projects for people's livelihood, and public housing."
A researcher affiliated with the economic planning agency said, "The NDRC will be more cautious this time." This year's approvals are concentrated in favored industries like clean energy, he added; in 2009 infrastructure projects dominated the investment surge.
Worries over inflation are another reason not to fully open the stimulus floodgates. Wages for urban workers employed by the broad category of employers that includes listed companies, state-owned enterprises and government agencies were up 14.3% last yearâ€"8.5% after living expensesâ€"to an average of 42,452 yuan ($6,693) a year, Chinese officials said on Tuesday. The increase, which outpaced a 13.5% rise in 2010, will help China's drive to create a more consumer-based economy, but also keeps upward pressure on prices.
In the first four months of the year, the NDRC, which screens all large investment projects, approved 868 of them, up from 363 a year earlier, according to public notices posted on its website over the course of the year. That included 254 projects in April aloneâ€"up from 213 in March and more than three times the 74 projects approved in April of 2011.
The investment projects range from new steel mills to hospitals and water treatment plants to clean-energy projects. The rapid pace of approvals appears to have been sustained in May, although the full data won't be available for some weeks, as the NDRC often delays official announcements after approvals have actually been granted.
In just the past week, the NDRC has approved two major new steel plants, with investment sizes of $9.5 billion and $11 billion. Some industry watchers raised concerns that this would exacerbate oversupply in the steel sector, but Li Xinchuang, executive vice secretary general of the China Iron and Steel Association, said it's consistent with an industrial policy that encourages the development of high-end and energy-efficient plants.
"These companies have been waiting for several years, and they deserve the approvals," Mr. Li said.
Most announcements don't include the total investment amount, so quantifying the economic impact is difficult. But the increased pace of approvals clearly indicates that Beijing is shifting to support more investment, analysts say.
Some economists have questioned the need for a massive investment push, and also questioned Credit Suisse's forecast of the size of the stimulus.
"It's too early to quantify China's stimulus in response to a financial crisis; the current slowdown is no comparison to the one in late 2008," Bank of America-Merrill Lynch economist Lu Ting said in a note on Tuesday. "If Greece does not exit from the euro zone and there is no global financial crisis, there is no need for China to introduce such a big stimulus package."
â€"Liyan Qi, Yajun Zhang and Liu Li
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