Macro Analysis /
China

China: How Much More Space for Infrastructure in China?

    Duncan Wrigley
    Duncan Wrigley

    Chief Strategist

    Everbright SHK
    4 July 2019
    Published by

    1. This report draws on international comparisons to make the macro case that China has plenty of room for economically worthwhile projects in certain infrastructure areas. It also estimates the potential for faster infrastructure FAI, as the official data series.

    2. We used indicators of railway mileage, electricity consumption and Internet users as the proxy variables of infrastructure from 11 countries to estimate that a baseline for Chinese infrastructure growth of 6.6% yoy. 

    3. Furthermore, if the infrastructure investment in the central and western regions maintains a higher growth rate than that in the eastern regions, it can be deduced that the capital investment growth rate in the central and western regions still needs to be 1.8 ppts higher than that of east over the next three years.

    4. Therefore, EBS estimates that China's reasonable growth rate for infrastructure investment should be 2.9 ppts higher than the baseline, so a max of 9.5%. That number will increase if China is forced to resort to increase infrastructure FAI as a result of slowing international growth or an increase in trade tensions.