The government of Changsha, the capital of central China's Hunan province, has launched an 829 billion yuan ($130 billion) investment stimulus programme to bolster the local economy, state media has reported. The money would be spent on 195 projects, including airport, subway and urban infrastructure facilities, as well as developing energy efficient industries, said a report by the official China News Service on Wednesday.
The government of Changsha, a city known for its machine-making and non-ferrous metal industries, would also speed up financial reform and innovations, said the report, which provided no details about how the programme would be financed. The China News Service paraphrased Chen Runer, the Communist Party secretary of Changsha, saying that economic pressure on the city could not be ignored, despite relatively stable growth in the face of global headwinds, and it was time for initiatve. There was no reference to the programme's existence on the government of Changsha's website on Thursday.
Zhang Zhiwei, chief China economist at Nomura in Hong Kong, calculates that the headline number on the stimulus plan is worth 147 percent of Changsha's nominal GDP in 2011, or 1.8 percent of China's national economic output. Even if spread over five years, Zhang says the implied investment would be equivalent to 46 percent of total annual fixed asset investment in Changsha. Sceptics say a programme on that scale is implausible and could not be properly financed with China's banks still nursing bad loans worth an estimated 2-3 trillion yuan after local governments racked up debts of 10.7 trillion yuan in the wake of Beijing's nation-wide stimulus programme unveiled in 2008. "Indeed financing is a problem, we expect projects to be financed by banks, local government and the central government collectively, but banks will likely be the main source," Zhang said in a note to clients.