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Investments approvals gather pace

By Wei Tian  (China Daily)

14:07, May 29, 2012

Workers at a factory that manufactures equipment for iron and steel mills, in Huaibei, Anhui province. China is moving faster to approve new projects to bolster the country's economy, such as iron and steel projects. [Photo / China Daily]

China's faster pace of approving investments is raising the expectations that the government will adopt a new round of fiscal stimulus worth up to 2 trillion yuan ($315 billion).

At the same time, though, many fear such short-term measures will further unbalance the country's economy.

The National Development and Reform Commission (NDRC), China's top planning agency, recently approved a 70-billion-yuan steel project that is to be built in Zhanjiang, Guangdong province. The project, which has been delayed eight years since its plans were first submitted for approval, will commence construction in late May.

The Zhanjiang project is only one among many pieces of evidence suggesting the NDRC is speeding up its approval process for large-scale projects. The commission's website said more than 100 projects were approved on May 21 alone, a number equal to the total number of projects approved during the first 20 days of the month.

So many projects in China are now awaiting formal approvals that "local officials are standing in line in front of the commission's Beijing office to get entry permits", the Beijing-based China Times reported.

The report came after Premier Wen Jiabao, speaking at an executive meeting of the State Council on Wednesday, vowed to put a greater priority on maintaining steady economic growth. He said that goal is to be achieved through the use of more monetary fine-tuning and fiscal incentives.

And a recent World Bank report warned of risks to the Chinese economy.

"Considering the already accommodative monetary stance, the burden of any policy support should fall on fiscal policy ... but fiscal stimulus should be less credit-fueled, less local government-funded, and less infrastructure-oriented, unlike the 4-trillion-yuan package in 2008," the report said.

A new round of stimulus spending could inject from 1 trillion yuan to 2 trillion yuan into the Chinese economy, according to Tao Dong, a Hong Kong-based economist with the financial services company Credit Suisse Group AG.

"Central authorities have encouraged local governments to advance the start dates of infrastructure projects that they already have planned," Tao said. "There are also credit lines for railways, subsidies for environmental-protection projects and money for public housing."

"It'll be like a 'mini-me' version of the 2008 stimulus," said Stephen Green, an economist at the international banking company Standard Chartered PLC.

"As of yet, no numbers are attached to the package, but many of the measures appear similar - approval of infrastructure projects, subsidies for consumer goods sales, encouragement of non-budgetary sources of financing," Green said.


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