More on China’s New Economic Stimulus
The past few days have brought a flurry of news about the second portion of the 4 trillion yuan Chinese economic stimulus to be released. This amount (130 billion yuan or US$19 billion) is to include 11 billion yuan for environmental protection projects. We previously posted about green stimulus in China and the US here.
Reuters noted that:
The 21st Century Business Herald… gave the following breakdown of how the 130 billion yuan would be spent:
- 28 billion yuan on affordable housing;
- 31.5 billion yuan on public infrastructure, such as electricity, water and roads;
- 17 billion yuan on health and education;
- 11 billion yuan on environmental protection;
- 15 billion yuan on economic restructuring (which often refers to upgrading technology and promoting consolidation in industrial sectors);
- The remaining 27.5 billion yuan on unspecified major infrastructure projects.
The National Development and Reform Commission [NDRC], China’s top economic planner, will publish the spending details when it announces the second tranche, but confirmed that it would amount to 130 billion yuan, the official Xinhua news agency said.
The commitment of an explicit portion of the stimulus to environmental protection is very good news, and it’s an important signal that China continues to give this priority. However, we still don’t have details on the green aspects of the stimulus, and are looking forward to seeing the NDRC’s announcement on spending details. We do note that the stock market reaction, though, has been favorable in the energy intensive, high-pollution industries, such as steel, cement, petroleum and chemicals. Bloomberg News reported that:
Angang Steel Co., China’s second- largest steelmaker, and Anhui Conch Cement Co., the biggest cement producer, rose after economic data suggested a government stimulus package is taking effect.
Angang Steel jumped 13 percent, the most in 10 weeks, to close at HK$8.22 in Hong Kong. Anhui Conch climbed 7.3 percent, the most in more than six weeks, to close at HK$38.75.
And Bloomberg notes also:
Liuzhou Iron & Steel Co. jumped by the 10 percent daily limit to 3.87 yuan. Tangshan Iron & Steel Co., the country’s fifth-biggest steelmaker, gained 9.3 percent to 4.70 yuan…
A stimulus plan for the textile and machinery industries will be submitted to the Cabinet today, Shanghai Securities News said yesterday. The government said Jan. 14 it would cut taxes and offer subsidies for the auto and steel industries…
Maanshan Iron & Steel Co., China’s fourth-largest listed steelmaker, added 0.09 yuan, or 2.5 percent, to 3.72. The company was raised to “buy” from “sell” at UBS AG after the broker said it changed the way it valued the stock.
China Daily also noted that China may enact stimulus in the refining and chemicals industry. As a result:
China Petroleum & Chemical Corp., the nation’s biggest oil refiner, gained 1.5 percent to close at HK$4.17 in Hong Kong trading today.
We’re looking for signs that the stimulus will have similar impact on green industries. The reaction from the heavy industries has certainly been positive. Bill Brekke, “the U.S. Commercial Service’s top representative in China” is optimistic about the business opportunities created by China’s green stimulus though, he tells the Shipping Digest Online:
“Since March 2007, it’s been the official policy of Hu Jintao and Wen Jiabao that China will move to a circular economy,” he said…. The Chinese use the term “circular economy” as one which balances economic development with environmental and resources protection.
“Every official in the country is being judged on their ability — on their green work. So it isn’t ‘build the power plant anymore; it’s build an energy-efficient power plant, it’s build a clean power plant.’ So U.S. sales in the environmental area and the remediation areas and energy efficiency areas are way up,” Brekke said. The U.S. does well in … green technology to China…
He said the Chinese are prepared to buy American green buildings, wastewater management, integrated gas, combined cycle, healthcare and other expertise.
So it is good to see this optimism about the market for green technologies in China. However, the U.S. Commercial Service’s interest largely stops at the point of sale. Much work still needs to be done to make sure that those purchasing green technologies (like pollution control technology) actually operate those technologies, as this MIT study makes clear.
It is going to take hard work in both the US and China to make sure that green stimulus stays on track.
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