2018 is turning out to be a bumper year for local government spending ambitions, with 25 of China’s province-level authorities unveiling a slew of major project investment plans.
Economic Information Daily reports that the major project investment plans of ten Chinese provinces, including Fujian, Hebei, Jiangsu, Jiangxi and Jilin, are each in excess of 1 trillion yuan (approx. USD$156.08 billion).
In north-eastern China Jilin province plans to implement a total of 2184 projects worth over 100 million yuan, for a total investment amount of 1.68761 trillion yuan, of which 447.85 billion will be allocated this year.
Hebei province in northern China is implementing 440 major projects for total investment of over 2.5 trillion yuan, and annual planned investment of 800 billion yuan.
Jiangsu province has arranged 240 major projects this year for total investment of 3.4 trillion yuan, of which 220 projects are currently being implemented, for annual planned investment of 522.5 billion yuan.
Fujian province is host to 1562 major projects of which 1150 are currently under development, for a total investment sum of 3.6 trillion yuan and annual planned investment of 430.8 billion yuan.
In the south of China Guangdong province has made arrangements for 1098 major projects with a total investment sum of 5.67 trillion yuan, while Hunan and Hubei province will undertake 168 and 221 projects respectively, for total investment of 1.12 trillion yuan and 1.101 trillion yuan.
In the central China the 697 projects outlined by Chongqing municipality will involve total investment of 2 trillion yuan, while the 1090 projects planned for Henan province will see total investment of 2.97 trillion yuan.
Province-level governments are emphasising the importance of “effective investment” with respect to these projects, as well as focusing on the tech sector and strategic emerging industries.
“This round of investment differs from previous rounds, especially with regard to higher quality as compared to the past, with investment in strategic emerging industries and the cultivation of new [economic] drivers” said Wang Zhigang (王志刚), a researcher from the Macro-economics Research Center of the Chinese Academy of Fiscal Sciences, to Economic Information Daily.
In tandem with the spate of major government investments for 2018, there has also been a marked decline in the total number of public-private partnerships that have previously been a key area of policy emphasis.
Xu Hongcai (徐洪才), an economist from the China Center for International Economic Exchanges, said to Economic Information Daily that a number of PPP projects had “gone rotten” last year during operation, with local governments using them to increase leverage or debt ratios.
Wang Zhigang, said that standardisation of the PPP project library would help to prevent financial risk, avoid the accumulation of local government debt – particularly in underdeveloped areas, and ensure the sustainable development of regional economies.
Analysts say that the industry has long awaited overarching legislation governing PPP’s, but that given the breadth of such legislation this will still requires extensive co-ordination between multiple government departments.
Xue Tao (薛涛), a PPP consultant for the National Development and Reform Commission and the Ministry of Commerce, said that while PPP legislation would help to resolve a number of problems in relation to the deployment of such projects, this would still fail to satisfy the massive demand for financing from local Chinese government.
According to Xue the financing needs of China’s infrastructure projects remain immense, while funding channels have become increasingly scarce following efforts by Beijing to standardise local government debt-raising practices.
Xue said that local government finance demand is also unbalanced, and for this reason greater reform is needed at both the central and local government levels in order to further improve pricing mechanisms.
“In macro terms, the balancing of finances requires a shift as soon as possible away from land revenues that are dependent upon cyclical urban expansion, towards dependence upon more stable long-term taxes and fees.”