Source: the finishing touch of Zhongjin
Authors: Deng Qiaofeng, Zhang Wenlang, Peng Wensheng
The 11th meeting of the Central Financial and Economic Committee was held on April 26 to study the issue of comprehensively strengthening infrastructure construction and the implementation of the decision-making arrangements of the Central Financial and Economic Committee since the 19th CPC National Congress. The meeting pointed out that China's infrastructure does not meet the needs of national development and security, and stressed that infrastructure is an important support for economic and social development, and it is necessary to coordinate development and security. optimize the layout, structure, function and development model of infrastructure, and build a modern infrastructure system. The Central Financial and Economic Committee is an important institutional arrangement for the party Central Committee to lead economic work. All localities and departments should accurately understand the spirit of the decision-making and deployment of the Central Financial and Economic Committee and jointly promote the implementation of the decision-making and deployment.
Infrastructure has been raised to an important position related to economy and security, which will help to enhance the hub of infrastructure growth in the medium term.The meeting pointed out that infrastructure construction should pay attention to efficiency, calculate both economic and comprehensive accounts, and improve the comprehensive efficiency of infrastructure throughout the life cycle of infrastructure; infrastructure should be moderately advanced, and the layout is conducive to leading industrial development and safeguarding national security of infrastructure; at the same time, grasp the degree of advanced construction. We think that the comprehensive account here involves many considerations such as economic security, ecological and social benefits, such as the direct economic benefits brought by water conservancy projects are on the low side (public welfare attribute), but the security and social benefits are outstanding. However, judging from the topics discussed by the Central Finance Commission, we think that infrastructure growth should also seek a multi-objective balance, that is, we should not only advance but also grasp the degree of advanced construction, under the premise that the general direction of local hidden debt regulation will not waver, so it will boost infrastructure investment, but it is more positive in the medium term.
The meeting pointed out that it is necessary to strengthen the construction of network infrastructure such as transportation, energy, and water conservancy, take networking, network replenishment, and strong chains as the focus of construction, and strive to improve the efficiency of the network.From the perspective of specific content, energy infrastructure, comprehensive three-dimensional transportation (such as water transport, air transportation, freight railway, etc.), urban agglomeration traffic, water conservancy, new infrastructure, rail transit, urban renewal (such as pipe network, intelligent transformation), and rural infrastructure have become the focus of infrastructure development. Our annual infrastructure development targets show that this year, the growth rate of investment in power grid, operator computing network and IDC, some transportation (such as high-speed, rail transit), water conservancy and so on may be relatively high.
The meeting stressed the need to strengthen support and guarantee for infrastructure construction through planning, land use, sea energy use, funds, and many other channels.Under the guidance of this policy, combined with the 23 measures recently issued by the central bank, we believe that it will help to ensure the joint efforts of infrastructure projects and funds, and speed up the landing of major construction projects during the 14th five-year Plan and create a physical workload.
Judging from the recent situation, the growth rate of broad infrastructure investment in the first quarter of this year reached 10.5%, the highest since 2018 (not taking into account the high infrastructure growth brought about by a low base in the first half of last year). Statistics Bureau data show that the growth rate of government budget funds invested in the first quarter of this year reached 34.7%, with obvious pre-expenditure characteristics, and the growth rate of subsequent capital expenditure may slow down. According to the infrastructure tracking index system compiled by us, the terminal construction of infrastructure has not improved significantly as of the third week of April, which we believe may be mainly related to the barriers caused by the epidemic to construction and cross-regional transportation of building materials. in addition, the net financing of urban investment corporate bonds also fell slightly in April. However, if the epidemic can be alleviated in May this year, combined with the introduction of recent favorable policies, physical investment in infrastructure is expected to be compensated to some extent by the end of the year.
In our previous report, we forecast 6-8% growth in the broad sense of infrastructure (5% in the narrow sense). Although this year's infrastructure funds face that the revenue of government funds is lower than the budget target, and the government needs to increase direct and indirect expenditure against the epidemic (such as increasing tax cuts, stabilizing consumption, etc.), the growth rate of financial expenditure on infrastructure is still expected to reach 4-5% (which in turn supports 4-5% growth in narrow-sense infrastructure). If we see a significant relaxation in the social financing conditions of infrastructure during the year (for example, policy banks increase their support for water conservancy and other public welfare infrastructure, and urban investment and financing conditions improve), the growth rate of infrastructure may be closer to the upper limit of our previous forecast range.
Chart: previous issues of the Central Committee of Finance and Economics
Source: China Government Network, China International Capital Corporation Research Department
Chart: net financing amount of urban investment bonds
Source: Wande Information, China International Capital Corporation Research Department
Chart: medium-and long-term loan growth rate for infrastructure
Source: central Bank, China International Capital Corporation Research Department
Chart: recent status of high frequency tracking index of infrastructure construction
Source: iFind, Steel Federation, China International Capital Corporation Research Department. For specific index compilation methods, please refer to the report "detailed explanation of Capital Construction Progress in one article".
Chart: summary of construction objectives in some areas of infrastructure
Source: Ministry of Transportation, National Energy Administration, announcement of listed companies, Ministry of Water Resources, China International Capital Corporation Research Department
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