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Li Keqiang Says China to Speed Up Railway Construction

Chinese Premier Li Keqiang said the nation will speed up railway construction with a focus on the central and western parts of the country, adding support for an economy that’s set to expand at the slowest pace in 23 years.
China will set up a railway development fund with fiscal revenue and public investment, the State Council said in a statement yesterday after a meeting led by Li. The government also plans to grant ownership and operating rights on some city and regional railways to local government and private investors.
Additional spending would help the world’s second-largest economy, after the government signaled this week it will protect its 7.5 percent growth target for this year following a second straight quarterly slowdown. Economists surveyed by Bloomberg News cut expansion forecasts this month, reaching a new median estimate of 7.5 percent, which would be the lowest since 1990.
“To get rich, you must build roads first, especially railroads,” Li was cited by the official Xinhua News Agency as saying at the meeting. Accelerating railway construction brings “multiple benefits” by promoting urbanization, stabilizing growth and improving people’s lives, Li said.
Delegates to the National People’s Congress from central and western provinces have told Li that the area’s rail system is “still underdeveloped, and people there are eagerly looking forward to more railways,” he said, as cited by Xinhua.
Trains, Maintenance
China had planned to invest 520 billion yuan ($85 billion) in railway construction this year, according to a rail-bond prospectus published July 19. Total fixed asset investment by the railroads, which also includes train purchases and maintenance, will be 650 billion yuan.
“I suspect that we will see a lot of announcements of targeted spending over the next few months,” said Mark Williams, a London-based economist at Capital Economics. “They may not add up collectively to much of a stimulus but they reflect efforts to really stabilize growth at the current level.”
Investors are looking for signs of additional support measures after exports fell last month by the most since the global financial crisis. China’s manufacturing weakened more than estimated in July, according to a preliminary survey of purchasing managers released yesterday.
President Xi Jinping called on the nation to “enhance vitality” of the state-run economy and encourage, support and guide the development of the private sector after meeting provincial leaders in Wuhan, according to another Xinhua report.
Tax Exemptions
Other resolutions passed at yesterday’s cabinet meeting include the exemption of companies with monthly sales of less than 20,000 yuan from value-added and business taxes starting Aug. 1, according to the statement. The move will benefit more than 6 million small businesses and affect jobs and income of tens of millions of people.
China will also reduce administrative fees on export inspections and encourage financing and tax rebate services for small firms to promote trade, according to yesterday’s statement, and will seek a balance of international payments that ensures stability of the yuan exchange rate.
Separately, government agencies including the National Development and Reform Commission vowed to improve measures to cut drug prices this year and push forward public hospital reform, according to another statement on the central government’s website.
To contact Bloomberg News staff for this story: Xin Zhou in Beijing at [email protected]; Jun Luo in Shanghai at [email protected]
To contact the editor responsible for this story: Paul Panckhurst at [email protected]