China's Growth Rate Slows, Accelerates Expansion of Infrastructure Investment

[Asia Economy Beijing=Special Correspondent Park Sun-mi] As China is engulfed in concerns over economic growth slowdown due to the spread of COVID-19, local governments are accelerating infrastructure investments that have the effect of boosting growth rates.

On the 4th (local time), the International Monetary Fund (IMF) predicted that China's economic growth rate this year will fall below 5.6% due to the impact of the COVID-19 spread, revising the growth rate forecast downward by 0.4 percentage points from the January projection.

Kristalina Georgieva, Managing Director of the IMF, mentioned that the damage caused by the COVID-19 spread to the Chinese economy will be greater than expected, and as a result, the global economic growth rate this year is also expected to fall below last year's 2.9%.

China's February economic indicators already fully reflect the impact of COVID-19. Manufacturing and service sector indicators fell to record lows, and automobile sales decreased by 80% compared to the same period last year, marking the largest decline ever.

Consequently, there are opinions that the Chinese government will implement monetary easing policies by lowering interest rates in line with the moves of countries around the world that are considering interest rate cuts to minimize the damage caused by the COVID-19 spread.

China Securities Journal, under the state-run Xinhua News Agency, mentioned in a full-page article on the 4th that "the People's Bank of China has the possibility of joining the ranks of interest rate cuts." The newspaper added, "In the context of interest rate cuts by major central banks around the world, it is a relatively good choice for China to adjust its policy interest rate."

Meanwhile, local governments in China are preparing to aggressively pursue infrastructure investments that help increase growth rates. According to the state-run Global Times on the 5th, nine provincial governments in China, including Hebei Province and Fujian Province, have announced infrastructure investment plans totaling 33.83 trillion yuan (approximately 4.86 trillion dollars).

Some of these have already moved beyond the planning stage and have been implemented. For example, despite the COVID-19 spread situation, on the 27th of last month, construction work began on a high-speed railway connecting Zhengzhou in Henan Province and Jinan in Shandong Province.

Chen Lun, an economist at the research institute under the National Development and Reform Commission (NDRC) of China, explained, "China's fixed asset investment growth rate recorded 5.4% last year, and it is expected to rise to around 6.5 to 7% this year," adding, "This will have the effect of raising the overall gross domestic product (GDP) by 2 percentage points." He added, "Infrastructure investment is an effective way for the Chinese economy to cope with external shocks," and "It can help the economy return to a normal state."

The Chinese leadership has also formalized the direction of economic stimulus through expanding investment in 'new infrastructure,' led by the construction of 5th generation (5G) mobile communication networks and internet data centers. This means that the likelihood of fully deploying a strong infrastructure investment card has increased.

According to Xinhua News Agency, at the Politburo Standing Committee meeting held the previous day with the participation of Chinese President Xi Jinping, discussions were held on COVID-19 prevention and economic stabilization measures. The Standing Committee stated, "The progress of constructing new infrastructure facilities such as 5G networks and data centers must be accelerated," presenting 5G network construction and data center construction as representative examples of 'new infrastructure' projects.

This content was produced with the assistance of AI translation services.