China to add $1 trillion stimulus to transportation infrastructure and to revive North East

After announcing Yuan1.6 trillion stimulus package for the country’s ailing North East to boost growth, a further $722 billion package has been announced for country’s transportation infrastructure today. In the first quarter this year, country’s North East, which is home to country’s heavy industrial companies (mostly SOEs) reported weakest growth rate.

The total package announced since yesterday is about $1 trillion, equivalent to almost 10% of China’s GDP. The spending will be phased out in three years.

$250 billion are supposed to be spent on 130 projects. According to Mr. Zhou Jianping, the man in charge with reviving growth and transforming North East under National Development and Reform Commission (NDRC), central government has recognized the need to help out sectors such as coal mines in the North East. He said, “Some of them date from before the Communist liberation [in 1949] and after liberation a lot of them were low-tech. The north-east has contributed a lot to China in terms of coal, oil and human resources, so Beijing needs to help with pensions and a sustainable environment”.          

NDRC said the Yuan 4.7 trillion under transportation infrastructure will be spent on around 300 projects including railways, roads, waterways, airports and metro systems.

These massive stimulus packages, Beijing has launched this year would reduce if not nullify the chances of immediate hard landing but shores up significant inflation and credit risk in distant future.