China steps up stimulus spending at local level

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By ELAINE KURTENBACH, Associated Press

SHANGHAI (AP) — China is stepping up stimulus spending at the local level seeking to counter its economic slowdown, with one inland city announcing plans for a whopping $130 billion in investment projects.

In announcing earlier this week plans for dozens of projects, officials in the central Chinese city of Changsha said increased investment was the "inevitable choice" to counter sluggish growth.

A notice on the city government's website said investments would total 829.2 billion yuan ($130 billion) but gave no specific details, referring only to services and investment projects.

As part of the government's "mini-stimulus" program, several other cities have disclosed plans to subsidize housing purchases or otherwise act to support the construction spending that remains the lifeblood of China's economy.

China's economic growth slowed to a three-year low of 7.6 percent in the second quarter, prompting Beijing to launch various piecemeal initiatives meant to fight off the slump. They include 66 billion yuan ($10 billion) to build affordable housing and 26.5 billion yuan to subsidize sales of energy-efficient appliances. The government began reversing lending and investment curbs intended to cool inflation and an overheated economy late last year, after demand for China's exports plunged.

"Monetary and fiscal stimulus measures are evidently restarting the investment cycle, which will drive production in the near term," Alaistair Chan, an economist for Moody's Analytics, said in a research note. He pointed to increased or renewed investments in railway, water, gas and electricity projects.

Such policies will support a "soft landing" for the economy, Chan said, though longer term growth will be more subdued than in the past.

"The years of better than 8 percent annual expansion are over, in our view," Chan said. He forecasts growth at about 7.8 percent in 2013.

Nanjing has said it plans to subsidize home purchases by some first time buyers. Other cities have also stepped up investment in public housing, alternative energy, petrochemicals and other areas.

It is unclear if Changsha's ambitious blueprint will be carried out fully. Many Chinese cities are already saddled with massive debt burdens from lavish spending in 2008-2009 meant to ward off the impact of the global crisis.

Changsha is the capital of Hunan province, a region known best for its fireworks, fiery cuisine and as the birthplace of revolutionary leader Mao Zedong. It now aspires to be a hub for high technology.

A recent survey by the China Academy of Social Sciences ranked the city fourth in competitiveness after San Jose, California, Hong Kong and the eastern Chinese city of Suzhou. State media reported that the city's GDP per capita ranked third among China's provincial capitals.

Cities such as Beijing, Shanghai and Fuzhou in the southeast are speeding up construction of expressways and subway projects. Other cities have received approval to upgrade hospitals, water treatment and other public facilities.

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