In the second half of this year, the economy starts to recover from the effects of Covid lockdowns, China announced another stimulus measure to finance infrastructure projects, part of its push to drive investment and increase employment.
The government will raise 300 billion yuan $44.8 billion to finance infrastructure projects by selling financial bonds and other methods, according to a report by the official Xinhua News Agency. The bonds are usually sold by policy banks. The statement on Thursday said that the money will be used to replenish the capital of major projects such as new types of infrastructure.
The meeting concluded that these financial tools can help expand effective investment, drive employment and facilitate consumption and allow China to stick to its stance of not flooding the economy with stimulus or over-printing money and improve the transmission of monetary policy.
Infrastructure projects are a key factor in how fast the economy can grow as other sources of growth such as housing and private consumption are still slowing down in the last six months of the year. President Xi Jinping pledged last month to meet economic targets for the year, although Beijing's Covid Zero strategy has caused analysts to cut their annual growth forecasts to levels far below the official goal of around 5.5%.
The three policy banks were told in June to lend for infrastructure projects, in addition to the 800 billion yuan they were told to lend. The loan quota has already been allocated to the policy banks, according to local newspaper The 21st Century Business Herald on Friday, citing sources it didn't identify.
What are the policy banks that China is using to spur the economy? China Development Bank received a credit line of 400 billion yuan, the Agricultural Development Bank of China received 300 billion yuan and another 100 billion yuan went to the Export-Import Bank of China, according to the newspaper. The main source of funds for development banks is issuing bonds or loans from China's central bank, although it hasn't been announced who is providing these credit lines.
The size of the additional bonds is only a fraction of what the policy banks normally issue in a year. According to Bloomberg's calculations, the banks sold 5.5 trillion yuan bonds in the interbank market last year, with a monthly average of 460 billion yuan, based on Chinabond and Shanghai Clearing House data. Between January and May this year, they issued 2.3 trillion yuan in bonds.
The State Council, the cabinet, has promised to implement a series of investment projects that are aimed at increasing the income of workers and boosting their consumption. Over 30% of the central government funding will have to be spent on paying workers, up from 15% previously.
None ADT Is Betting Google Can Drag It Into the Future?