China Tries to Revive Economy With $205 Billion of Projects in 2020: Report

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(Bloomberg) -- China will likely spend about $205 billion this year on projects ranging from 5G networks to power grid enhancements to rail upgrades as it tries to revive its economy after the coronavirus pandemic, according to BloombergNEF.

Those sectors are among seven that China has identified as “new infrastructure,” which it wants to prioritize in its recovery, BNEF said in a report Friday. The focus on stimulus comes after the government’s lockdown to halt the spread of Covid-19 caused the economy to contract by an unprecedented 6.8% in the first quarter.

The investments in technology, mass transport and power infrastructure would strike a contrast to China’s stimulus plan that followed the 2008 financial crisis, which focused on heavy industries and infrastructure, BNEF analysts including Nannan Kou said.

“The hope is that these areas, some of which were immune to Covid-19 disruptions, could help form the basis of China’s economic recovery,” BNEF said in the report. “This effort should not be labeled as a green stimulus plan, but is a promising indicator of the country’s desire to find less carbon-intensive growth drivers.”

The new infrastructure spending is expected to form part of a stimulus package that would also include funneling money into the old economy. The seven investment areas, and the portion of spending BNEF expects them to receive, are:

SectorPercentage of spending
Rail and metro systems59%
Ultra-high-voltage power lines13%
5G networks12%
Internet of things7%
Data centers6%
Artificial intelligence2%
Electric vehicle chargers1%

The government will likely support projects in these fields by giving them priority permitting, along with guarantees of land, energy and labor, while financing will come from special municipal debt, according to the report.

Investment in 5G networks could boost demand for batteries needed for backup power and speed the development of automated vehicles, according to the report. The UHV power lines, which are more efficient over long distances, would connect remote power generation facilities to major population centers.

“These seven areas are not new on the country’s economic priority list and were originally viewed as part of China’s ongoing effort to shift its economy away from low-end manufacturing products,” BNEF said. “The Covid-19 outbreak and the ensuing national lockdown has elevated the importance of these sectors.”

©2020 Bloomberg L.P.

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