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Infrastructure investment still holds significant potential.
Release date:
2018-05-17
Source:
China's infrastructure investment growth has been steadily slowing down, a trend partly due to the relatively high comparison base from the previous year, but also an inevitable outcome of economic dynamics—meaning its impact on overall economic growth remains limited. Looking ahead in the medium to long term, however, China's infrastructure investment still holds vast room for expansion and significant potential. To capitalize on this, we should continue deepening reforms of the investment and financing system, leveraging investment as a key driver for optimizing the supply structure, and further refine investment strategies specifically within the infrastructure sector.
These短板 and gaps are precisely the areas where we must focus our efforts to address weaknesses in the future. Therefore, we must continue to thoroughly implement the spirit of the 19th National Congress of the Communist Party of China and the policy decisions outlined at the Central Economic Work Conference, emphasizing key priorities, tackling短板, and strengthening weak areas. We will further deepen reforms of the investment and financing system, leveraging the critical role of investment in optimizing the supply structure. At the same time, we’ll keep refining investments in infrastructure, proactively addressing emerging challenges and contradictions. Ultimately, our goal is to lay a solid foundation for sustained economic growth and improved living standards for the people.
Data released by the National Bureau of Statistics on May 15 showed that, in the first four months of this year, China's infrastructure investment grew by 12.4% year-on-year—slowing down by 0.6 percentage points compared to the first quarter, and decelerating by 10.9 percentage points from the same period last year.
Investment is a key driver of economic growth. For decades, infrastructure investment has played a critically important role in China’s economic expansion. However, as the pace of infrastructure investment continues to slow down, many are concerned that this could hinder efforts to address critical development gaps—and potentially disrupt the steady trajectory of the broader economy.
In fact, as China’s economy enters a "new normal," its growth rate has shifted from high-speed to medium-to-high speed, transitioning from extensive growth driven by scale and speed to intensive growth focused on quality and efficiency. This shift also marks a move away from being fueled primarily by factor-driven investment toward innovation-led development. As a result, the distinctive features of China’s new economic normal—such as a change in growth momentum, structural adjustments, and a transition in drivers of growth—are bound to leave a profound impact on fixed-asset investment, particularly in infrastructure projects.
On one hand, as the economy shifts from its past period of double-digit high growth to a phase of moderate-to-high-speed expansion, investment growth is inevitably adjusting accordingly. This is because, over the past 40 years of reform and opening up, China has continuously undertaken large-scale investment and infrastructure development—resulting in an already massive investment footprint in the infrastructure sector. Consequently, it’s no longer feasible for infrastructure investment to sustain growth rates exceeding 20% as it once did. In this sense, the gradual deceleration of infrastructure investment reflects the broader economic transition toward slower but more sustainable growth, aligning perfectly with the natural laws governing economic dynamics.
On the other hand, in our country's long-term infrastructure investments, substantial funds have been concentrated on sectors such as railways, highways, and airports—areas that require massive capital outlays but also demonstrate a clear ripple effect, boosting related industries. After years of intensive investment and development, in some relatively advanced regions, the phase of large-scale infrastructure investment has largely come to an end. As a result, it’s no longer feasible to adopt a "big-bang" approach; instead, greater emphasis must be placed on enhancing investment efficiency—a necessity for pursuing high-quality development. Meanwhile, in certain less-developed areas, while infrastructure investment is still in a phase of significant expansion, progress must remain steady and deliberate—after all, you can’t expect to eat a whole steamed bun in one bite! Moreover, during the investment process, we must learn from the experiences—and avoid the pitfalls—of more developed regions, steering clear of blind investments and redundant projects driven solely by the pursuit of speed and scale.
Additionally, in line with the requirements of the three major tough battles, relevant authorities have taken further measures to streamline and clean up PPP projects, as well as to regulate local government debt-financing activities. These steps are expected to have a certain impact on infrastructure investment growth in the short term.
This clearly shows that China's infrastructure investment growth has been steadily slowing down—both due to the relatively high base compared to the same period last year, and as an inevitable reflection of broader economic trends. Notably, although the pace of infrastructure investment is decelerating, it still remains above double-digit levels, indicating a relatively robust rate of growth. Moreover, in recent years, consumption has increasingly become the cornerstone of China's economic expansion. In the first quarter of this year, final consumption expenditure contributed 77.8% to economic growth—surpassing the contribution from total capital formation by 46.5 percentage points. As a result, the current slowdown in infrastructure investment growth is unlikely to have a significant impact on overall economic growth.
In the medium to long term, China's infrastructure investment still has significant room and potential for growth. As one of the world's largest developing countries, China remains in a phase of rapid industrialization and urbanization. However, critical infrastructure sectors such as transportation, water resources, energy, information technology, and utility networks continue to face notable shortcomings. Moreover, issues of unbalanced and inadequate development remain particularly pronounced. According to relevant data, China's current per capita infrastructure capital stock is only 20% to 30% of that found in developed Western nations. In some underdeveloped regions of western China, the gap in infrastructure assets compared to eastern areas is even more striking—these regions hold roughly half the national average level of infrastructure.
These短板 and gaps are precisely the areas where we must focus our efforts to address weaknesses in the future. Therefore, we must continue to thoroughly implement the spirit of the 19th National Congress of the Communist Party of China and the policy decisions outlined at the Central Economic Work Conference, emphasizing key priorities, tackling短板, and strengthening weak areas. We will further deepen reforms of the investment and financing system, leveraging the critical role of investment in optimizing the supply structure. At the same time, we’ll keep refining investments in infrastructure, proactively addressing emerging challenges and contradictions. Ultimately, our goal is to lay a solid foundation for sustained economic growth and improved living standards for the people.
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