SINGAPORE (Jan 14): China’s massive infrastructure spending, for years a favourite economic stimulus tool, has reached new scale and magnitude. As a result, the actual impact will not be as strong as before, says Vincent Chan, Credit Suisse’s head of China equity strategy.

In 2008, China spent RMB5 trillion on infrastructure; a decade on, it spent RMB25 trillion ($5 trillion). “When you’ve increased five times in 10 years, it becomes very difficult for you to really grow strongly,” reasons Chan, in an interview with The Edge Singapore.

In addition, changes in government policies and practices have dampened the enthusiasm of local officials in carrying out their work. Local governments have taken on a lot more debt, and the central government is wary. To curb the excesses, local officials are now personally liable if projects fail and loan defaults occur. Previously, if the same local officials were posted elsewhere, it would not be their problem anymore but their successors’. If and when a rebound from infrastructure spending happens, it will be more “subdued” compared with previous cycles, says Chan.

To continue reading,

Sign in to access this Premium article.

Subscription entitlements:

Less than $9 per month
3 Simultaneous logins across all devices
Unlimited access to latest and premium articles
Bonus unlimited access to online articles and virtual newspaper on The Edge Malaysia (single login)

Stay updated with Singapore corporate news stories for FREE

Follow our Telegram | Facebook