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mce-anchorChina plans $2.44 trillion investment with private partnerships 5.2.2015

China could see over Yuan 15 trillion ($2.44 trillion) in investments at a local level this year, more than the entire national budget in 2014, according to local government investment plans. The exact effect on steel demand remains uncertain however, as many of the details of the investment still have to be agreed and many of the investments will require little steel, Kallanish notes.

Across the 14 provinces which have announced their plans, Henan, Fujian and Sichuan have the most ambitious proposals, according to a report in the Shanghai Securities Journal. Henan intends to see Yuan 3.57 trillion invested this year, Fujian Yuan 3.04 trillion and Sichuan Yuan 2.99 trillion in projects which include infrastructure. These also include however less steel-intensive activities such as communications networks, agriculture and forestry.

Public private partnership is the new model of choice for China’s massive local government investment, which has been a key driver of steel demand over the last decade. Local governments are severely under-funded and have previously relied on land sales and extensive borrowing to fund local GDP-boosting projects. Much of this has come despite Beijing banning local government from borrowing privately. Public private partnerships are seen as a way of ensuring greater visibility in local project financing as well as supporting local government spending during the slowdown in GDP growth.

The impact on real steel demand will depend on the level of take-up among private investors and the focus on infrastructure and construction over less steel-intensive investments