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China Plans $75 blon Infrastructure Fund to Revive Economy

KABUL (BNA) China’s economy has begun a slow recovery from supply shocks from widespread lockdowns since the second quarter, although headwinds to growth remain, including a still-under-pressure asset market, and low consumer spending, and fears of any repeat wave of infections.

The fund is expected to be set up in the third quarter, the sources said without providing further details.

China has unveiled a raft of economic support measures in recent weeks, although analysts say the official gross domestic product target of around 5.5% for this year will be hard to achieve without doing away with its strict zero-COVID strategy.

Much of the support for the world’s second-biggest economy has come from fiscal stimulus to counter the impact of COVID-19 this year, with the central bank steadily easing liquidity conditions to lower financing costs.

Authorities are doubling down on an infrastructure push, dusting off an old playbook to revive the economy, pledging 800 billion yuan in new credit quota and 300 billion yuan in financial bonds for policy banks to fund big projects.

Wang Yiming, a policy adviser to the central bank, told a forum in late June that China faces big difficulties in achieving the growth target and suggested it should consider raising the budget deficit or issuing special treasury bonds.

To meet the full-year target, China must reach 7-8% of economic growth in the second half of 2022, which is 3-4 percentage points higher than the growth rate in the third and fourth quarters of last year, Wang said.

In a report issued on Monday, analysts at Citi estimated a fiscal shortfall of 1-2 trillion yuan this year, but the chance of issuing special bonds could decline as the government resorts to semi-fiscal funding, such as via policy banks.

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