BEIJING- China will set up a state infrastructure investment fund worth 500 billion yuan ($74.69 billion) to spur infrastructure spending and revive a flagging economy, two people with knowledge of the matter told Reuters on Tuesday.
China’s economy has started a slow recovery from the supply shocks caused by extensive lockdowns since the second quarter, although headwinds to growth persist, including from a still subdued property market, soft consumer spending and fear of any recurring waves of infections.
The fund is expected to be set up in the third quarter, the sources said.
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 percent for this year will be hard to achieve without doing away with its strict zero-COVID strategy.
Much of the economic support has come from fiscal stimulus to counter the impact from 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 support big projects.
Sources told Reuters that China will issue 2023 advance quota for local government special bonds in the fourth quarter, with the new quota likely bigger than 1.46 trillion yuan for 2022.
The Ministry of Finance and the National Development and Reform Commission did not immediately respond to Reuters’ requests for comment.
The cabinet has told local governments to ensure 3.45 trillion yuan in special bond issuance for infrastructure – part of the 2022 special bond quota of 3.65 trillion yuan – is completed by the end of June.
Meanwhile, Chinese Vice Premier Liu He had a “constructive” virtual dialogue with US Treasury Secretary Janet Yellen on Tuesday, with both sides agreeing to better coordinate macro policies, according to China’s commerce ministry.
China also expressed concern over the additional tariffs that the United States had imposed on Chinese goods, in an exchange that was “pragmatic and frank”, the ministry said in a statement.
The US Treasury Department concurred in its own statement, saying the exchange was “candid and substantive”, but did not mention China’s concern about US tariffs.
US President Joe Biden is in the process of making up his mind on easing US tariffs on China, in part to ease inflation which he has said is a top priority.
There has been a divergence on easing the tariffs within the Biden administration, and Yellen had said some tariffs on China inherited from the administration of former President Donald Trump made “no strategic sense”.
“The Chinese side expressed its concern over issues such as the lifting of additional tariffs and sanctions imposed by the United States on China, and fair treatment of Chinese companies,” the Chinese ministry said.
“Both sides agreed to continue to maintain dialogue and communication.”
Asian shares edged higher on Tuesday morning as signs of easing Sino-US tensions offered some respite to the market’s recent sell-off. A Wall Street Journal report saying Biden will possibly ease tariffs this week in efforts to slow inflation also buoyed sentiment. MSCI’s gauge of Asia Pacific stocks outside Japan rose 0.3 percent.
In its statement, the Treasury Department said Yellen “frankly” raised issues of concern including the impact of Russia’s war against Ukraine on the global economy and unfair and non-market Chinese economic practices. – Reuters
