Econintersect: China is adding modestly to infrastructure spending and tax 
breaks for smaller companies in an effort to support the weakening economy. The latest GDP results (2Q 2013) were reported and the year-over-year growth was 7.5%. If this was the growth for the entire year it would be the lowest GDP grwoth in 23 years, according to Reuters. The announcement yesterday (24 July 2013) by Premier Li Keqiang indicated that rail investment for the year was being raised from 650 billion yuan to 690 billion yuan ($112 billion).
Here is an excerpt from Reuters:
“Premier Li’s team has been surely working around the clock” to arrest the slowdown, said Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong. “It’s a small stimulus” that may boost confidence while having a limited effect in boosting demand, Lu said by e-mail today.
The tax breaks announced are in the area of fees levied for export services.
Ambrose Evans-Pritchard said in The Telegraph:
China has backed away from further shock therapy for its debt-sated economy, setting a minimum floor for growth and preparing a fresh round of stimulus measures.
Evans-Pritchard identified that at least part of the added $40 billion for rail infrastructure will be applied to building the world’s longest undersea tunnel across the Bohai Strait. According to Wikipedia the completion of the tunnel had been scheduled for 2022 and the total cost $42 billion. The tunnel will be 70 (123 km) miles long, 52 miles (70 km) under water.
Map from Wikipedia.
Sources:
- China’s Li Vows Support Measures From Rail to Tax Breaks (Bloomberg News, 24 July 2013)
- China eyes fresh stimulus as economy stalls, sets 7pc growth floor (Ambrose Evans Pritchard, The Telegraph, 23 July 2013)
- Bohai Strait tunnel (Wikipedia)
