The hope is that developing projects such as high-speed rail will bring temporary jobs, economic growth and investment to lesser known areas. Amid concerns about high-debt levels, analysts said China is trying some alternative financing methods such as private partnerships and project-based debt issuance.
Infrastructure spending can also come in the form of investment in technologies such as 5G and the internet, Vanguard’s Wang said.
With its “Made in China 2025” plan, Beijing aims to turn the country into a global technology leader. In a Jan. 22 report, the Economist Intelligence Unit found that cities which have aligned themselves with the central policy generally have better growth prospects.
However, it’s unclear how quickly and to what extent increased spending on such infrastructure projects will help economic growth. China has already built an extensive high-speed railway network, especially in the most prosperous regions. And in another major issue for authorities, the private sector which creates most new jobs is struggling in a financing and operating environment that still favors state-owned enterprises.
“The debt-driven model, China cannot totally abandon it,” the Economist Intelligence Unit’s Wang said. “When consumption cannot drive growth, debt-driven infrastructure spending is necessary.”