China orders local governments to halt some infrastructure projects
China has ordered heavily indebted local governments to delay or halt some state-financed infrastructure projects, three people with knowledge of the situation said, as Beijing struggles to control debt risks even as it tries to boost the economy to stimulate.
The Council of State has stepped up its efforts to manage municipal debt in recent weeks, issuing a directive to local governments and state-owned banks to postpone or halt construction of projects with less than half of the planned investment has been completed in twelve regions across the country. said.
Beijing has tightened debt restrictions in recent months to defuse risks to the world’s second-largest economy and its financial stability, while also trying to boost growth that has long depended on infrastructure investment by local governments .
Infrastructure covered by the latest directive, which has not previously been reported, includes highways, airport reconstruction and expansion and urban rail projects, the source said.
Some projects, such as those approved by the central government or for affordable housing, have been exempted, two sources said.
The sources asked not to be identified because the guidance was confidential. The State Council Information Bureau, which handles media inquiries for the council, China’s cabinet, did not respond to a request for comment.
Reuters reported in October that the council had restricted the ability of local governments in the 12 regions to take on debt and limited the state-funded projects they could launch.
It then ordered local governments to halt “problematic” public-private partnership projects and impose other restrictions on investments, Reuters reported in November.
Annual foreign investment is shrinking for the first time since 2012
Foreign direct investment in China contracted in 2023 for the first time in more than a decade, according to data released by the Commerce Ministry. This underlines the challenge Beijing faces in winning back foreign companies as Western governments talk of ‘de-risking’. Foreign companies invested $157.1 billion in the world’s second-largest economy last year, according to a statement on Friday, marking an 8.0 percent year-on-year decline and the first drop since 2012. “2024 will be even worse ,” said Alicia Garcia Herrero, chief economist at Natixis.
A collapse in Chinese stocks is wreaking havoc on the country’s asset management industry, sending the number of mutual fund closures to a five-year high in a new sign of declining investor confidence. About 240 local mutual funds were liquidated last year, according to 2014 data compiled by Bloomberg. That’s the highest number since 2018, when stricter asset management regulations caused a major shake-up in the sector.
Of the closed funds, four out of five had an equity-oriented mandate, which was a record.
Brazil supports Beijing’s ‘One China policy’: Minister Wang Yi
Brazil supports Beijing’s “One China Policy,” Foreign Minister Wang Yi said on Friday after a meeting in Brasilia with his Brazilian counterpart Mauro Vieira.
The two men also discussed the conflicts in Ukraine and Gaza and how they can be resolved, Vieira said, with China’s top diplomat saying the two trading partners need to build a higher level of trust. A new comprehensive visa agreement between the two countries should boost tourism, Vieria said.
First print: January 19, 2024 | 11:55 PM IST