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China Needs to Build More Subways, Highways, NDRC Says

Sept. 18 (Bloomberg) -- China needs more subways, highways and sewage plants, and construction of that infrastructure will help the economy, a senior planning official said.

Xu Lin, head of the planning department at the National Development and Reform Commission, told reporters in Beijing yesterday that recently published approvals for projects only represent part of what’s in the pipeline.

“In an economic slowdown, the government has to take some counter-cyclical measures -- it’s absolutely normal, and it’s part of macro-economic control,” Xu said at a forum at Peking University. “China still has large demand for infrastructure projects.”

Premier Wen Jiabao, who pledged last week to employ monetary and fiscal policies to spur growth, has increased infrastructure spending and refrained from introducing another stimulus package, with fiscal support limited to tax cuts and accelerated project approval. The economy grew 7.6 percent in the second quarter from a year earlier, the smallest increase since March 2009.

The Shanghai Composite Index fell 0.7 percent as of 1:10 p.m. local time, as tensions with Japan added to concerns about China’s slowdown.

Xu’s comments come after the NDRC this month published approvals for building as much as 2,018 kilometers (1,254 miles) of roads and subway projects across the country. Nomura Holdings Inc. estimated the total value of projects approved at about 1 trillion yuan ($158 billion). The NDRC has also green-lighted a slew of railroads, sewage-treatment plants, ports and warehouses.

Easing Concern

China’s stocks yesterday fell the most in 10 weeks on speculation the government won’t ease monetary policy as quickly as anticipated. At least 12 banks and brokerages have cut their gross domestic product forecasts so far this month, with UBS AG, Morgan Stanley and Barclays Plc now predicting the nation’s growth will sink to a 22-year low of 7.5 percent this year.

Xu said the accelerated project approval did not mean the government is rolling out more stimulus. A 4-trillion yuan package of tax cuts and state spending announced in 2008 stoked inflation and sparked concern local governments took on more debt than they can afford.

“These projects are already in our plan,” Xu said. “Infrastructure is the backbone system for the national economy and society. In the long-term, if infrastructure is good, it’s helpful for overall efficiency.”

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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