China approves $157 b infrastructure spending

Reuters: China has given the green light for 60 infrastructure projects worth more than $150 billion as it looks to energise an economy mired in its worst slowdown in three years, fuelling hopes the world’s growth engine may get a lift from the fourth quarter.

Shares and steel futures jumped on the plans to build highways, ports and airport runways, among the most ambitious unveiled in China this year, which analysts say signalled growing intent to bolster economic growth as the country’s once-a-decade leadership change looms.

China’s powerful economic planning body, the National Development and Reform Commission, announced approvals for projects that analysts estimate total more than 1 trillion yuan, roughly a quarter of the total size of the massive stimulus package unleashed in response to the global financial crisis.

The announcement comes just before a deluge of economic data due on Sunday that could confirm investors’ worst fears that a downswing in the world’s second-biggest economy has stretched into a seventh straight quarter.

“Apart from the large sizes of the projects, the announcements for these new projects were all made in two days, which is very intense,” said Zhang Zhiwei, an economist at Nomura in Hong Kong.

“It signals a change in policy stance, which is now much more proactive.” China’s economy may be boosted by the increased spending in the last quarter of 2012.

Crucially, the projects are endorsed by Beijing and are likely to proceed. This is in contrast to pledges from nearly a dozen local governments in the last two months to spend around 7 trillion yuan to pump prime the economy, plans that economists say will not materialise due to funding shortages.

China steel futures jumped and its stock market rallied by the most in eight months on the news.

Shanghai-listed Sany Heavy Industry (600031.SS), Shenzhen-listed Zoomlion 000157.SZ and Taiyuan Heavy (600169.SS) all surged 10 percent. Japanese construction equipment makers also got a boost, with shares of Komatsu Ltd (6301.T) rising 6.6 percent in Tokyo and Hitachi Construction Machinery Co Ltd (6305.T) up 4.7 percent.

Investment is a mainstay of China’s economic prowess, accounting for 54.2 percent of the country’s 9.3 percent expansion in its economy last year.