China’s 500 billion yuan in new policy-based financial instruments has been fully allocated, aiming to support a number of projects in key areas and weak links, and is expected to drive total project investment of over 7 trillion yuan, according to a report by state media Xinhua News Agency on Thursday.
At the Central Politburo meeting of the Communist Party of China on April 25, it was proposed to introduce new structural monetary policy tools and establish policy-based financial instruments to support technological innovation, boost consumption, and stabilize foreign trade. Five months later, these new financial instruments have been fully rolled out.
On September 29, the National Development and Reform Commission (NDRC) held a routine press conference. Li Chao, spokesperson of the NDRC, said that the current economic operation still faces many risks and challenges, and the NDRC will continue to make efforts and implement macro policies in a timely manner.
Li specifically mentioned that, to promote better financial services for the real economy, and expand effective investment, the NDRC, together with relevant parties, actively promoted the work related to the new policy-based financial instruments. The total scale of the new policy-based financial instruments is 500 billion yuan, all of which is used to supplement project capital.
“We are working with relevant parties to quickly allocate the funds from the new policy-based financial instruments to specific projects. We will subsequently supervise local governments to promote accelerated project commencement and construction, quickly generate more physical work output, expand effective investment, and promote stable and healthy economic development,” Li said at the time.
Recently, the three policy banks—the China Development Bank, the Agricultural Development Bank, and the Export-Import Bank—announced the progress of the allocation of the new policy-based financial instruments. From the allocation structure, major economic provinces received key support, with increased focus on private investment and emerging industries such as the digital economy and artificial intelligence.
Xinhua News Agency cited experts as saying that, based on the experience of policy-based and development-oriented financial instruments in 2022 effectively accelerating infrastructure investment, the projects supported by the newly implemented policy-based financial instruments are expected to be intensively launched from October to December.
This will help convert projects reserved in the first half of the year into actual construction starts and quickly turn them into physical work output in Q4, promoting expanded effective investment and supporting stable and healthy economic development, the report said.
Lu Zhe, Chief Economist at Soochow Securities, said that the new policy-based financial instruments are mainly aimed at projects that are about to start or have already started but are not yet completed, serving as project capital to quickly increase physical work output. Based on past experience, policy-based financial instruments are expected to play a certain leverage role in Q4 infrastructure investment.
Wang Qing, Chief Macro Analyst at Golden Credit Rating International, said that currently, due to external environment volatility, continued adjustments in the real estate market, and relatively tight fiscal revenues and expenditures of local governments, recent investment growth has continued to decline.
“The new policy-based financial instruments, as project capital, will mainly be directed toward the infrastructure sector, focusing on addressing the prominent issue of insufficient project capital caused by tight local government finances. Over the next three years, they can drive annual infrastructure investment growth of 3–4 percentage points, becoming an important support for stabilizing investment,” he said.