China to Invest Multiple Billions in Infrastructure Improvements

In response to the global economic slowdown beginning to challenge the country, China’s State Council—its Cabinet—will spend (US) $570 Billion over the next two years to finance programs in 10 major areas, most of which deal with infrastructure.

In addition to allocating money for reconstruction of areas hit by a major earthquake on May 12, the stimulus program includes such projects as building a gas pipeline to serve the economic engines of Guangzhou and Hong Kong, building and expanding nuclear power plants and water conservancy undertakings in other areas, among others. Spending of $18 Billion for fourth quarter 2008 projects is already underway.

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Some claim the infrastructure investment program is not quite as large as might be thought because of the amount of money being claimed since more than half of it comes from previously allocated funding. Be that as it may, there is infusion of fresh capital into these projects.

There has been a reduction in export orders for China accompanied by a decline in domestic consumption. Where last year’s gross domestic product (GDP) grew by 11.4%, current projections are that 2008 will finish with just 9.4% growth in GDP. Following on the heels of consistent double-digit annual growth, the Chinese government is attempting to get ahead of the wave of the world’s economic malaise. Projections for economic growth for 2009 range from an annual 8.6% to the Asian Development Bank’s forecast of 9.5% growth for 2009.

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