Why is Xi Jinping Emphasizing Infrastructure Investment?

Direct Order for Economic Stimulus Through Infrastructure Investment Amid Concerns of Economic Downturn
Record High of 10.76 Million College Graduates... Crowding into Low-Wage Jobs Due to Employment Difficulties

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Chinese President Xi Jinping has called for increased infrastructure investment. Xi’s specific mention of infrastructure investment in the economic sector overseen by Premier Li Keqiang signifies that the Chinese economy is facing considerable difficulties.

[Image source=Yonhap News]

The Communist Party of China’s official newspaper, People’s Daily, reported on the front page of its 27th edition that President Xi, at the 11th meeting of the Central Financial and Economic Affairs Commission held the previous day, emphasized that infrastructure is the core of economic and social development and urged a comprehensive strengthening of infrastructure construction.

President Xi stated, "Building a modernized infrastructure system is the foundation for the comprehensive construction of a socialist modernized country," specifically pointing to airports and other transportation hubs, energy, and water resources sectors. He also called for concrete monetary and fiscal policy measures, including long-term funding support to expand infrastructure investment.

Why Did President Xi Directly Order Economic Stimulus?

President Xi’s directive to expand infrastructure investment came amid a prevailing sentiment that China’s economy will struggle to meet this year’s growth target of ‘within 5.5%’ following the release of the Gross Domestic Product (GDP) figures. China’s economic growth rate for the first quarter was 4.8%, which is 0.7 percentage points below the leadership’s target. Guangdong Province and Shanghai, considered core pillars of the Chinese economy, recorded growth rates of only 3.3% and 3.1%, respectively. The resurgence of COVID-19 led to a contraction in consumption, pulling down growth rates. Industrial production is also showing signs of slowing.

The only sector showing some hope is fixed asset investment (infrastructure). The fixed asset investment growth rate for the first quarter increased by 9.3% year-on-year. This was thanks to the Chinese government issuing local special bonds from the end of last year as part of economic stimulus efforts, pouring funds into the infrastructure sector. Given the continued adherence to the ‘Zero COVID’ policy, reliance on infrastructure investment is currently unavoidable.

The Central Financial and Economic Affairs Commission meeting was attended by the National Development and Reform Commission, Ministry of Emergency Management, Ministry of Industry and Information Technology, Ministry of Transport, Ministry of Housing and Urban-Rural Development, Ministry of Agriculture and Rural Affairs, Ministry of Water Resources, Ministry of Ecology and Environment, and the People’s Bank of China. Considering the composition of these departments, it is possible to infer which sectors will be the focus of future investments.

Employment and Consumption Issues Likely to Influence Public Sentiment

Growth rate pertains to the macroeconomy. Even if the original target of 5.5% is achieved through economic stimulus, it is meaningless if it does not resonate with the lives of 1.4 billion people. Employment falls into this category. This year, the number of university graduates is expected to reach 10.76 million, an increase of 1.67 million from last year?the highest ever.

Global Times reported that university graduates facing employment difficulties are being pushed into low-wage jobs. The outlet stated that most graduates are lowering their job expectations this year due to external factors such as the economic downturn. It also reported that the average monthly salary of employed university graduates this year is about 6,507 yuan, approximately 12% lower than last year. It added that wages are declining as the number of job seekers increases amid unfavorable economic conditions.

Zheng Xiangquan, director of the China Employment Research Institute at Renmin University, expressed concern, saying, "As the Chinese economy faces downward pressure, employment opportunities for university graduates are decreasing," and "The resurgence of COVID-19 has further increased uncertainty in the graduate labor market."

The employment difficulties can also be glimpsed through China’s electricity consumption. Economic media Caixin cited a report from the China Electricity Council, stating that electricity consumption growth in the first quarter is expected to decrease by 4-5% year-on-year.

By industry, electricity consumption in transportation-related sectors increased by 12.4% in January-February but only 1.5% in March; accommodation and catering sectors rose from 11.3% to 1.5%; and rental-related sectors increased from 11.8% to just 4.8%.

The decline in electricity consumption growth indicates a weakening economy. The employment market for university graduates is inevitably tightening. Last month, the urban unemployment rate in China rose by 0.3 percentage points from the previous month to 5.8%, reflecting the sharp drop in electricity usage.

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