China has launched a $120 billion credit line for infrastructure projects, state media reported, as Beijing tries to jump-start its ailing economy, which has been pounded by the country’s zero-COVID measures.
Growth has slowed sharply in recent months as the Communist leadership sticks to a strategy of quashing virus clusters with mass tests and lockdowns — forcing factories to halt work and clogging supply chains.
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Premier Li Keqiang last week called for “reasonable” expansion in the second quarter as fears mount for the vaunted official annual growth target of around 5.5 percent.
Pump priming hard-hit provinces with infrastructure schemes has emerged as a key tool to create jobs and drive growth in local economies flatlined by the virus and a concurrent collapse in receipts from land sales to developers.
A State Council meeting chaired by Li on Wednesday approved a mammoth new sum for infrastructure.
“It is necessary to increase the credit line of policy banks by 800 billion yuan ($120 billion),” state broadcaster CCTV reported.
Experts say the announcement is likely to help provincial governments match Beijing’s banner statements on supporting growth.
“It will provide long-term support to various infrastructure projects,” said Betty Wang and Zhaopeng Xing of ANZ Research in a report on Thursday.
In turn that will “drive business activities along the supply chain”.
The amount is “nearly half of the 1.65 trillion yuan in new policy bank lending in 2021,” Nomura analysts added in a note.
The sum accounted for about a fifth of new medium to long-term loans for the infrastructure sector in 2021, the note said.
Nomura analysts estimate that Beijing has a six trillion yuan funding gap, in part due to a collapse in land sales — a key source of funds — and because of the Omicron wave.
The latest virus outbreak was China’s worst since early in the pandemic, and caused its key business hub Shanghai to be sealed off for two months.
While the city has since eased curbs as cases drop, a rebound will be gradual — businesses remain jittery over future flare-ups and there is a massive backlog of goods at the port.
Read more: China’s zero-COVID policy dashes global hopes for quick return to economic normalcy
