China Invests in Infrastructure

While China's economic expansion has slowed, investors are optimistic that this is a result of the nation maturing. There is a shrinking productivity gap in China compared to advanced economies, leading to a natural decrease in growth. President Xi JinPIng calls this lower growth the new normal. 

Infrastructure will continue to be a prominent part of the Chinese investment program. Contrary to more general economic trends, the Chinese construction industry outpaced gross domestic product growth in 2016. The country reiterated its commitment to infrastructure spending in the immediate term, citing low raw material prices and increasing domestic demand as drivers.

There currently are 1,455 large-scale infrastructure construction projects in China. These projects have a total investment value of $2.8 trillion. The railways sector accounts for the largest share of the project pipeline, with a total value of $1.25 trillion.

China’s 13th 5-Year Plan sets out the country’s most recent set of social and economic initiatives, including priorities for its infrastructure sectors. Among the infrastructure targets is an investment of $395 billion in road and rail. Renewable and sustainable infrastructure has become more of a priority, particularly in the areas of water, sewerage, electricity and power.

The public sector will directly fund 79 fund of the infrastructure construction project pipeline, with a further 13 percent being funded privately. The remaining 8 percent will be funded through public-private partnerships. This overwhelming proportion of government-funded projects may become of greater concern in the future, as government debt reaches new heights and China adjusts to reduced growth levels. These projects promise a boost to the overall economy and to the construction industry as a whole.

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