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In 2017, China to Stimulate Economy with 45 Trillion Yuan Investment in Fixed Assets

On February 17, China Times published an article discussing China’s investments to stimulate the economy. According to the statistics that each province has released, the total investment to stimulate the economy in 2017 amounts to more than 40 trillion yuan (US$5.82 trillion). Twenty-three provinces so far have announced their 2017 fixed asset investment targets. Taking into account the provinces that have yet not published their data, the total investment in fixed assets this year will be at least 45 trillion yuan (US$6.54 trillion).

In addition to the large provincial budget targeted for infrastructure investment, the National Development and Reform Commission (NDRC) also announced the latest progress on major investment projects. On February 15, NDRC spokesman Zhao Chenxin said at a press conference that in January, NDRC approved 18 fixed asset investment projects with a total investment of 153.9 billion yuan (US$22.38 billion). These projects are concentrated mainly in water conservancy, transportation, and energy fields.

Beijing Fushengde Economic Consulting Firm Chief, Economist Feng Delin, told the China Times reporter, “These investments are mainly to cope with the economic slowdown.”

Source: China Times, February 17, 2017

China Steel Production Capacity Had Net Increase of 36.5 Million Tons in 2016

According to a report that Radio France Internationale published, Greenpeace East Asia and Custeel (a website that the China Iron and Steel Association, which 16 large-sized steel manufacturers and enterprises in China fund) conducted an investigation of China’s steel production. The findings showed that, despite the serious steel surplus that China faces, its 2016 steel production capacity actually increased by 36.5 million tons. The investigation report disclosed that even though China claimed that, in 2016, it shut down steel factories having 85 million tons of steel capacity, the number should only have been 23 million tons because the rest of the factories that were shut down had been idle, with no production capability. Meanwhile, according to the report, new projects launched in 2016 added 12 million tons of production capacity with most of it located in Hubei Province.

The report stated that China Steel production accounts for 50 percent of the production volume in the world. Competitors criticized (China’s steel industry) for using the destructive competition approach and selling below cost. As a result, in 2016, they faced anti-dumping treatment from the EU and the U.S. The Chinese authorities promised that, by 2020, China would reduce steel production by 100-150 million tons. In 2016, China’s steel production was around 1.1 trillion tons, which means it is sitting on 300 million tons of excess steel.

Source: Radio France Internationale, February 13, 2017                                                                          

IIF: 2016 Chinese Capital Outflow Reached US$725 Billion

Reuters Chinese recently reported that the Institute of International Finance (IIF) released its recent report on China’s capital outflow. According to numbers that the IIF provided, China’s 2016 outflow reached a record high of US$725 billion, which was a US$50 billion increase over 2015. The same number in 2014 was only US$160 billion. In the past two years, both Chinese businesses and individuals accelerated their process of sending money overseas, partially due to the expectation of the Chinese currency’s depreciation. High capital outflow caused a US$320 billion decrease in China’s foreign exchange reserve. In 2016, the Chinese currency RMB saw a record depreciation of 6.5 percent against the U.S. dollar. The IIF also suggested that China may see a higher capital outflow in 2017 if U.S. companies move their money back to the States, which they may do if the Trump administration delivers on its promise of tax relief on the flow-back dollars. The IIF estimated a US$206 billion capital outflow from developing economies, with most of this amount coming from China.

Source: Reuters Chinese, February 2, 2017

United States Became Top Destination of China’s 2016 Overseas Investments

Well-known Chinese news site Tencent recently reported that, according to newly released statistics, China’s 2016 overseas commercial real estate investment reached a record high of US$38.3 billion, which constituted over 45 percent of China’s overall overseas investments. The United States was the largest destination of China’s investment money, totaling US$18.3 billion, which represented a 400 percent growth over 2015. Chinese investment in Britain increased 32 percent. Hong Kong, Korea, Canada and Germany all saw growth. However, since China’s foreign exchange reserve decreased US$69.1 billion in November, that month, the central government tightened up control of overseas investments. That control included a ban on investments over US$10 billion and restrictions on deals over US$1 billion. Experts expressed the belief that overseas investments will remain strong in 2017 due to the fact that investors typically expect a low return on domestic investments.

Source: Tencent, January 26, 2017

China’s Premier Promises Foreign Investors Wider Access to New Sectors

China’s Premier Li Keqiang’s wrote an article on China’s economy, “Economic Openness Serves Everyone Better,” which was published on January 25 in Bloomberg Business Weekly. Li pointed out that, “We are opening new sectors of the economy to investment and widening access to many others.” The article was also published in full on the State Council’s official web site.
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