China's infrastructure investment: Current situation, problems and countermeasures

Four trend characteristics of China's infrastructure investment change

1. Overall investment growth slowed down

In 2022, driven by proactive fiscal policies and expanding effective investment policies, the growth rate of infrastructure investment, including electricity, will jump to 11.5%, playing a very key role in stabilizing investment. However, from a longer period of time, the overall growth rate of China's infrastructure investment is slowing down. Since 2013, infrastructure investment has entered a downward channel, and the growth rate has continued to decline from double digits. Especially since 2018, the growth rate of investment has fallen off a cliff. In 2018, infrastructure investment, including electricity, grew by only 1.8%. Although it rebounded to 3.3% and 3.4% in 2019 and 2020, it fell below the single digits again in 2021, dropping to 0.2%. On the one hand, the decline in the growth rate of infrastructure investment is related to the stage of China's economic development. At present, China's economy has entered the stage of high-quality development from the stage of high-speed growth, and the economic growth center has declined, including the investment growth center of infrastructure. On the other hand, preventing and resolving local government debt risk management has led to more limited sources of local government investment funds, and the growth rate of infrastructure projects that rely on direct government investment such as parks and green Spaces and municipal roads has declined most significantly.

(b) The investment structure is gradually tilted towards water conservancy, environment, public facilities management and new infrastructure

With the constant changes in China's economic and social needs, the structure of infrastructure investment has undergone profound changes. Benefiting from the rapid development of urbanization and the construction of a resource-saving and environment-friendly society, investment in water conservancy, environment and public facilities management has grown rapidly since the 12th Five-Year Plan period, and its proportion in infrastructure investment has increased from 25.1% in 2005 to 34% in 2010 and to 40.6% in 2015. It surpassed the transportation industry to become the largest infrastructure industry in terms of investment. Driven by the development of the new generation of information and communication technologies, investment in information transmission, software and information technology services has grown rapidly and accounted for an increasing proportion of infrastructure investment. Since the "13th Five-Year Plan", the new infrastructure represented by information infrastructure, integration infrastructure and innovation infrastructure has received wide attention and become a hot spot of government support and social investment. According to the estimates of the China Academy of Information and Communications Technology, during the "14th Five-Year Plan" period, China's new infrastructure investment will reach 10.6 trillion yuan, and the proportion of infrastructure investment will increase to about 10%.

3. Investment growth is significantly differentiated among regions

Since 2000, China has successively implemented the overall strategy of regional development, such as the development of the western region and the rise of the central region. The state has strengthened policy and fund support for the central and western regions, and infrastructure investment in the central and western regions has grown rapidly. The western region has taken the lead in infrastructure investment, accounting for 26% of total infrastructure investment in 2003 to 34% in 2020. Infrastructure investment in the central region began to accelerate from the latter part of the 12th Five-Year Plan, accounting for 20.5% in 2012 to 24.7% in 2020. The proportion of infrastructure investment in Northeast China increased first and then decreased. From 2003 to 2008, the proportion increased from 6% to 10.5%, and since 2014, there has been a trend decline, and the proportion has been less than 4% in 2020. By 2020, China's eastern, central, western and northeastern regions will account for 37.5%, 24.7%, 34% and 3.8% of infrastructure investment, respectively.

(4) The proportion of private investment is still low

For a long time, China's infrastructure is mainly invested and constructed by the government and its subordinate enterprises. Since the Third Plenary Session of the 16th Central Committee, especially since the reform of the investment and financing system in 2004, the proportion of private capital participating in infrastructure investment has continuously increased. In 2008, private capital accounted for only 7 per cent of investment in basic industries and infrastructure. In 2017, the proportion of private investment in infrastructure investment increased to 24.5 percent, becoming an important force in infrastructure investment. However, whether it is compared with 90% of private investment in manufacturing, or compared with more than 55% of private investment in overall fixed asset investment, the proportion of private investment in infrastructure is significantly lower, and there is still much room for improvement in the future.