Investment may drop in 7 key sectors
Source: Agencies |
July 8, 2011, Friday
|
Print Edition
Print Edition
CHINA may rein in plans to invest heavily in seven new strategic industries, including high-speed rail and wind power, scaling back cutting-edge projects for industries suffering from old-fashioned problems such as corruption and overcapacity, sources said.
The central government originally planned to invest up to US$1.5 trillion over the next five years in the seven sectors, hoping they would grow into a pillar of economic growth and help shift the world's second largest economy away from one centered on manufacturing cheap goods.
The pullback on spending stems partly from worries about corruption in the country's high-speed rail project and overcapacity concerns in the wind power sector, said two sources with knowledge of the plan.
"The government is now reconsidering the seven new strategic industries plan," a source told Reuters. "The (size of the) retrenchment is still under deliberation," the source added.
While high rates of fixed-asset investment have helped maintain strong growth, some economists, such as Nouriel Roubini, have argued that China's current levels of investment are unsustainable.
These days, China is more concerned about taming inflation and managing debts piled up by local and provincial governments that the country's state auditor estimates at 10.7 trillion yuan (US$1.65 trillion).
The strategic industries cover high-end equipment manufacturing, alternative energy, biotechnology, new generation information technology, alternative fuel cars and energy-saving and environmentally friendly technologies.
Lower spending in high-speed rail is directly related to the departure of the railway minister, sacked this year under a cloud of corruption, said the sources.
The former minister, Liu Zhijun, spearheaded China's high-speed rail expansion until he was removed in March for "disciplinary violations," a charge commonly used to denote corruption.
The ministry has denied any plans to cancel or downgrade rail lines. But new Minister Sheng Guangzu put investment in railway infrastructure in 2011 at 600 billion yuan, compared with Liu's pledge of 700 billion yuan.
Liu's tenure saw rapid development of China's high-speed rail network, surpassing Japan's storied bullet trains to become, at 8,400 kilometers, the world's longest. Liu had planned to boost the network to 50,000 km by 2015. Sheng told the official People's Daily that it would build a slightly more modest 45,000 km.
The ministry, already deep in debt, still expects to spend another 2.8 trillion yuan between now and 2015. But some analysts believe the investment surge has left it with an unsustainable debt burden.
Also to be pared back are plans for wind power.
The state planning National Development and Reform Commission and the National Energy Administration plan to build seven wind power plants in western China with generation capacity of at least 10 million kilowatts each, according to the country's 12th Five-Year Plan.
But critics say these projects could be ill-advised - requiring heavy spending in power grids because wind and solar power plants are located mainly in western, inland regions, while the manufacturing bases are concentrated in faraway coastal provinces.
The central government originally planned to invest up to US$1.5 trillion over the next five years in the seven sectors, hoping they would grow into a pillar of economic growth and help shift the world's second largest economy away from one centered on manufacturing cheap goods.
The pullback on spending stems partly from worries about corruption in the country's high-speed rail project and overcapacity concerns in the wind power sector, said two sources with knowledge of the plan.
"The government is now reconsidering the seven new strategic industries plan," a source told Reuters. "The (size of the) retrenchment is still under deliberation," the source added.
While high rates of fixed-asset investment have helped maintain strong growth, some economists, such as Nouriel Roubini, have argued that China's current levels of investment are unsustainable.
These days, China is more concerned about taming inflation and managing debts piled up by local and provincial governments that the country's state auditor estimates at 10.7 trillion yuan (US$1.65 trillion).
The strategic industries cover high-end equipment manufacturing, alternative energy, biotechnology, new generation information technology, alternative fuel cars and energy-saving and environmentally friendly technologies.
Lower spending in high-speed rail is directly related to the departure of the railway minister, sacked this year under a cloud of corruption, said the sources.
The former minister, Liu Zhijun, spearheaded China's high-speed rail expansion until he was removed in March for "disciplinary violations," a charge commonly used to denote corruption.
The ministry has denied any plans to cancel or downgrade rail lines. But new Minister Sheng Guangzu put investment in railway infrastructure in 2011 at 600 billion yuan, compared with Liu's pledge of 700 billion yuan.
Liu's tenure saw rapid development of China's high-speed rail network, surpassing Japan's storied bullet trains to become, at 8,400 kilometers, the world's longest. Liu had planned to boost the network to 50,000 km by 2015. Sheng told the official People's Daily that it would build a slightly more modest 45,000 km.
The ministry, already deep in debt, still expects to spend another 2.8 trillion yuan between now and 2015. But some analysts believe the investment surge has left it with an unsustainable debt burden.
Also to be pared back are plans for wind power.
The state planning National Development and Reform Commission and the National Energy Administration plan to build seven wind power plants in western China with generation capacity of at least 10 million kilowatts each, according to the country's 12th Five-Year Plan.
But critics say these projects could be ill-advised - requiring heavy spending in power grids because wind and solar power plants are located mainly in western, inland regions, while the manufacturing bases are concentrated in faraway coastal provinces.
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