Bloomberg News

Tianjin Sets $236 Billion Investment Target as China Slows

August 21, 2012

Tianjin Targets $236 Billion of Industry Spending as China Slows

An Airbus SAS A320 is assembled at the company's facility, in Tianjin, China. Tianjin’s plan includes 500 billion yuan of investment in petrochemicals, 370 billion yuan in heavy equipment and 70 billion yuan in aerospace, according to the Tianjin Daily report, which was also posted on a government website. Photographer: Nelson Ching/Bloomberg

Tianjin announced a multi-year target of 1.5 trillion yuan ($236 billion) for industrial investment, joining a similar plan by Chongqing amid local efforts that may help reverse China’s growth slowdown.

Tianjin, in northeast China, plans the investment over four years in 10 industries including petrochemicals and aerospace, according to a report today in the Communist Party’s Tianjin Daily. Chongqing, in the southwest, will boost industrial investment to 1.5 trillion yuan in the five years through 2015, the official Xinhua News Agency said yesterday.

The spending builds on reports last month that Changsha city will invest 829 billion yuan in projects including an airport and subway lines while Nanjing and Ningbo will introduce measures to boost consumption. The regional plans will help the national economy rebound in the second half, after expansion slowed to a three-year low last quarter, according to Nomura Holdings Inc.

“There are further signs that policy stimulus continues to be focused on infrastructure spending and consumption measures,” Dariusz Kowalczyk, economist at Credit Agricole CIB in Hong Kong, said in a note today after Chongqing’s announcement. He said separately that while there is a risk of overcapacity, the local industrial-investment plans are likely to be “well coordinated” by national economic planners.

The Shanghai Securities News today reported that China may give 5,000 yuan in subsidies for each purchase of a diesel car under a government plan to reduce carbon dioxide emissions.

Investment Funding

The reports didn’t say how much of an increase the spending would represent over previous plans. Tianjin had fixed-asset investment of 751 billion yuan in 2011, while Chongqing’s totaled 763 billion yuan. Investment nationwide rose 20.4 percent in the January-July period from a year earlier, while industrial production grew 9.2 percent in July, below the median economist estimate of 9.7 percent.

Bank lending and bond sales are likely to help fund the spending, Kowalczyk said. Tianjin Daily said the city will give preferential treatment to the industries through land and taxes.

Huang Qifan, Chongqing’s mayor, was quoted by the People’s Daily website today as saying the city will develop a “comprehensive, multi-channel, low-cost” financing system to support the industrial-investment plans. Huang said he hopes state money, private funds and foreign investors will join forces to finance projects.

Shares Rise

Shares of some companies based in the cities rose after the reports. Tianjin Global Magnetic Card Co. gained 5.2 percent to 2.42 yuan, while port-services provider Chongqing Gangjiu Co. advanced 10 percent to 7.26 yuan.

A former central bank adviser indicated he’s optimistic for a growth rebound in the second half. Li Daokui said in an interview in Beijing that China’s economy will expand 8.1 percent for the full year and fourth-quarter expansion may exceed 8.5 percent.

The People’s Bank of China injected record funds into the banking system today by conducting 220 billion yuan of reverse- repurchase operations, tempering speculation the country will lower banks’ reserve requirements.

Chongqing’s industrial investment plan will focus on building seven “big manufacturing industries,” including electronic information, automotive, equipment and parts manufacturing, oil refining, material and energy industries, according to Xinhua.

The electronic-information industry, which includes notebook computers, will receive 300 billion yuan in investment, while the car industry will get 200 billion yuan, Xinhua said.

Tianjin’s plan includes 500 billion yuan of investment in petrochemicals, 370 billion yuan in heavy equipment and 70 billion yuan in aerospace, according to the Tianjin Daily report, which was also posted on a government website. Other industries targeted include cloud computing, green energy and biomedicine.

--Zhou Xin. Editors: Scott Lanman, Paul Panckhurst

To contact Bloomberg News staff for this story: Zhou Xin in Beijing at xzhou68@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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