Here’s China’s next stimulus plan for the economy – it’s embedded in the Chinese government’s “National New-type Urbanisation Plan", which was released on Sunday, which calls for a massive build-out of transport networks, urban infrastructure and residential real estate from now until 2020.
In other words, the spending of trillions of yuan (the exact figure was not given) between now and 2020. But Government media reports suggest that at least $US163 billion will be spent on building nearly five million new dwellings this year.
To give you some idea of the enormity of this plan, last year’s mini stimulus was costed at around $US160 billion – and that succeeded in halting the economy’s mid year slide and lifting growth in the final months of 2013.
And last year China completed 1.12 trillion yuan of investments (roughly $US180 billion) in subsidised housing in 2013. The government said it “basically completed work” on 5.44 million subsidised housing units in urban areas and started construction on another 6.66 million, according to its National Development and Reform Commission in an annual work report this month.
The move should stop the slowdown in Chinese urban investment – it fell to an annual rate of just under 18% in the first two months of the year, down from around 20% in the first quarter of 2013.
It will also help the Chinese Government meet its 7.5% annual growth target as well.
The core part of the policy is to push 100 million people from countryside villages and small rural areas into larger urban areas. As a result, the proportion of permanent urban residents of China’s total population will reach 60% by 2020, against nearly 54% at the end of last year.
The government said the proportion of urban dwellers who hold household registration will increase to about 45%, from 35.7% in 2013.
The new urbanisation plans calls for a new, multiyear round of state-led infrastructure construction that they hope will prop up slowing economic growth.
“Domestic demand is the fundamental impetus for China’s development, and the greatest potential for expanding domestic demand lies in urbanisation,” the new plan stated.
While promising to make China’s urbanisation more “human-centred and environmentally friendly”, the plan also explicitly targets the boosting of headline growth at a time when China’s economy is slowing after years of frenetic credit-fuelled infrastructure and property investment.
One of the biggest changes to government policy – the altering of the strict household registration system (which determines who can live where and what services they are entitled to) will have to be altered, as the government has suggested it might do at some time in the near future.
But so far it excludes most people who live outside the major cities and towns, meaning there are around 270 million or more rural migrants who move to and fro between countryside and urban areas. They return to their villages if they become unemployed because they are not entitled to state help.
Over the longer term, China’s leaders want to shift the country’s growth model to make it less infrastructure driven and more reliant on services and consumption, but they insist that they must keep investment levels high in the short term to guarantee employment and political stability.
So to make this grand plan work, around 100 million rural dwellers will have to be given urban registration privileges.
As part of the new round of spending, the government plans to ensure that every city in China with more than 200,000 residents will be connected by standard rail and express roads by 2020, while every city with more than 500,000 residents will be covered by high-speed rail.
New airports will be built to ensure that the civil aviation network covers about 90% of China’s population.
The plan also calls for the redevelopment of 4.75 million household units in this year alone, with an expected total cost of $US163 billion, according to state media reports.
The urbanisation plan was originally expected to be published more than a year ago, but deep divisions between government departments and dissatisfaction from Chinese Premier Li Keqiang, who has been a strong champion of the scheme, delayed the plan’s release until now.
