Chinese Spring Festival spending increases slowly and infrastructural investment in 2019 will double to ensure growth

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According to data released by the Ministry of Commerce, China’s national consumption during the festive spring holiday increased by 9%, the first time in five years with increase rate lower than 11%. It reflects that the national retail industry is slowing down as a result of the trade conflict and weakening factory activities.

To make those figures look warmer, the Chinese government interprets the situation in a more positive way, “Commodity consumption reached USD 5.5 trillion in 2018 with a 9.1-percent increase, remaining the primary driving force for economic growth for five consecutive years. The actual utilization of foreign capital grew by 3 percent year on year to the record high USD 134.97 billion. China has moved 32 places upward in the World Bank ranking of the ease of doing business. Total volume of imports and exports reached USD 4.62 trillion with a 12.6-percent rise, making a new record.”

Still state media has given two major reasons why more and more people are spending less during the spring holiday season: first slow income increase; second orientation in consumer spending. Since 2015, there’s been an apparent slow-down in the increase of workers’ wages, especially in the private sector and rural farmers, the rates being 6.6% and 6.4% respectively in 2016 and 2017.

Geographically, income increases perform better in third and fourth tier cities. According to JD Big Data, expenditure in big cities like Beijing, Shanghai and Guangzhou was stagnant during the spring festival when many young workers left the big cities and went back to small hometown cities for the holiday. E-commerce thus performs better in smaller cities and young people have become the backbone for purchases, especially of AI controlled household appliances.

According to official data (which is widely viewed as fake), China’s economy in 2018 remained generally steady and made solid progress. Its GDP grew by 6.6% and exceeded RMB 90 trillion for the first time, meeting the targeted goal for growth. About 13.61 million new jobs were created in 2018, hitting the 13-million mark for the 6th year in a row. China reduced the number of poor people living in rural areas by over 10 million for the whole year, making great contributions to global poverty reduction. China steadily marched toward the world’s largest consumer of commodities.

According to Xinhua, investment, an important engine of the Chinese economy, is expected to grow faster this year, allowing China to better cope with economic uncertainties in 2019, according to an industry report from the Economic and Strategic Planning Department of the Bank of China (Hong Kong).

The report projected that China’s infrastructural investment would grow by 8 percent this year compared with 3.8 percent last year. This means the government, already heavily in debt, has to borrow more this year to sustain development.

The report forecasts a rise of 7.3 percent in China’s aggregated investment in 2019, up 1.4 percentage points from 2018. It says investment’s contribution to the growth of China’s gross domestic product will rise by 0.5 percentage points to 2.64 percentage points. In other words, about 40 percent of the year’s economic growth will be generated by investment.

Last October, the State Council issued a guideline on beefing up the investment in nine kinds of infrastructure facilities including railways, highways and waterways, airports, water conservancy, energy and environmental protection as well as infrastructure conducive to agriculture and rural development.

Railway and highway construction will be mainly used to facilitate the implementation of significant development strategies, including the Beijing-Tianjin-Hebei coordinated development, the Belt and Road Initiative, the Yangtze River Economic Belt, the Guangdong-Hong Kong-Macao Greater Bay Area and the Xiongan New Area.

The government has long relied on the model of pushing up consumption by government investment in infrastructures. When there is no other way effective to boost growth, this model will continue in the new year.

Citing statistics from the National Development and Reform Commission, the report said in the past month, the economic planner approved infrastructure construction projects with an aggregated investment of 500 billion yuan (about 74 billion U.S. dollars), which mainly involves inter-city railway, rail transit and airports.

Yesterday, 31 provincial government reports all release their projections for 2019’s GDP growth. Tibet plans for the highest target of 10%, while Tianjin the lowest of 4.5%. Guangdong, Shanghai and Beijing 6-6.5%; Shangdong and Jiangsu 6.5%; others 5%-9%.

The Ministry of Transport, China Railways Corporation and Civil Aviation Administration of China have all released their infrastructural construction targets for 2019, including fixed-assets investment of 1.8 trillion yuan in highways and waterways, 800 billion yuan in railway investment and another 85 billion yuan in airport construction, according to the Xinhua report.

Specifically, rural roads of 200,000 km long and waterways of 400 km long will be built, while new rail lines of some 6,800 km long will be laid, up 45 percent from last year.

In real estate sector, as home sale fell drastically last year, real estate control policies in some cities have begun to ease. Sadly in the first two months of 2019, both prices and sales volume drop further, especially in 3rd and 4th tier cities. Governments at all levels are doing hard to hold the bubble and avoid a collapse.

By Winnie Tropie

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