China to boost investment in key sectors

A boy playing on the site of a partially demolished building in China. The government is to renovate 18 million dilapidated urban houses and 10.6 million dilapidated rural homes across the country.
A boy playing on the site of a partially demolished building in China. The government is to renovate 18 million dilapidated urban houses and 10.6 million dilapidated rural homes across the country. PHOTO: REUTERS

Shantytown renovation part of blueprint to support growth

BEIJING - China has said it will step up "effective investment" in key sectors, including shantytown renovation and rural power infrastructure, to support growth, as latest figures hint that a property downturn is easing.

The government will increase investment in transforming shantytowns and dilapidated houses, as well as boost investment in rural electricity infrastructure and grain storage facilities, the State Council said after a regular meeting on Wednesday.

The government will implement a three-year plan to renovate 18 million dilapidated urban houses and 10.6 million dilapidated rural houses.

"In order to continue to respond effectively to the downward pressure, advancing to resolve structural problems, we should seize the favourable opportunity of lower raw material prices to develop 'bottlenecks'," the Cabinet said.

More investment will be channelled into modern logistics and urban transportation while the construction of water conservancy and railway projects will be quickened, it added.

China's economic growth slowed to a six-year low of 7 per cent in the first quarter as demand at home and abroad faltered, and data shows weakness persisted into the second quarter, putting more pressure on the government to step up policy stimulus.

Meanwhile, new home prices rebounded nationwide for the first time in 13 months in May, suggesting a property downturn is bottoming out after a barrage of stimulus from the central bank and local governments since late last year.

But economists warned that massive inventories of unsold homes could continue to drag down the world's second-largest economy well into next year, discouraging new investment and construction.

"Inventories in first-tier cities are back to healthy levels... but in third- and fourth-tier cities it will take at least two more years," said economist Rosealea Yao at Gavekal Dragonomics in Beijing.

Average new home prices in China's 70 major cities climbed 0.2 per cent in May from April, the first rise since May last year, according to Reuters calculations based on official data released yesterday.

While signs of a price stabilisation will ease strains on the economy and help banks heavily exposed to the real estate market, analysts said a full-blown sectoral recovery was still a long way off.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 19, 2015, with the headline 'China to boost investment in key sectors'. Print Edition | Subscribe