China to boost public investment due to lackluster private capital
"Given the slowdown, the government should begin to invest more, partly through special construction funds, to stimulate investment and stabilize the economy," Zhang Yong, deputy head of the National Development and Reform Commission, China's top economic planner, said during a press conference on Monday.It turns out the switch to a consumer, domestic, private, services-led economy takes time. In the meantime, the government will worsen the situation by added more debt and malinvestment.
Government investment will continue to focus on infrastructure construction and projects that affect quality of life, he said.
Zhang's remarks came as Chinese entrepreneurs appeared to remain reluctant to invest during the current economic downturn. Private investment increased only 2.8 percent in the first half of the year, down from 3.9 percent growth in the first five months and 5.7 percent in the first quarter, official data showed. In the past decade, private investment saw stellar year-on-year growth of over 20 percent.
"As private capital is concentrated in traditional industries, it needs more time for investors to find new bright spots in the economy during the current economic transformation," Zhang said.
In response, China has channeled more energy into infrastructure improvement, with growth of investment in the sector accelerating to 20.9 percent in the first half.
China State Council meeting as debt/GDP ratio hits the red line:
China's "augmented fiscal deficit" (i.e. off-budget items included) has climbed to nearly 15% of GDP --Goldman Sachs pic.twitter.com/V4eMlSGH7O
— Simon Rabinovitch (@S_Rabinovitch) July 25, 2016
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