Event:
On April 26, 2022, the 11th meeting of the central financial and Economic Commission was held, which pointed out that "comprehensively strengthen infrastructure construction, build a modern infrastructure system and lay a solid foundation for building a socialist modern country".
Ping An View:
This meeting will release three signals: first, in the medium and long term, infrastructure investment will play a more important role on both sides of supply and demand; Second, boost the market's confidence in steady growth and pay attention to how the Politburo meeting in April set the tone. Under the influence of China's external factors exceeding expectations, it requires more arduous efforts to achieve the growth target of about 5.5% of the annual GDP growth. Although the meeting did not pay much attention to the short-term steady growth of infrastructure, the meeting called for "comprehensively strengthening infrastructure construction", which will help boost the market's confidence in steady growth; Third, the infrastructure steady growth measures deployed in the early stage may still need to be strengthened. In the first quarter of this year, the full caliber infrastructure investment increased by 10.5% year-on-year. Due to the early impact of project commencement and financial funds (especially special bonds), it is difficult to stay at a high level in the follow-up. As some major infrastructure projects are based on the 14th five year plan at the national or local level, corresponding arrangements have been made in leading industrial development and safeguarding national security. The meeting pointed out that the comprehensive strengthening of infrastructure construction, or the side confirmation of the previous stable infrastructure policies still need to be strengthened.
Focus on how to solve the financing problems of infrastructure projects. The meeting deployed key construction areas and covered a wide range, which helped to alleviate the shortage of satisfactory infrastructure projects. However, compared with the project arrangement, the arrangement of fund guarantee is more principled. At present, the capital is expected to be the key constraint restricting the rebound of infrastructure. We should pay attention to how to refine and implement the follow-up policies: first, it is expected that the increment of financial capital invested in infrastructure in 2022 will be limited, including public finance and land transfer income; Second, it remains to be seen whether the comprehensive account of infrastructure investment can break through the core requirements of special debt supervision, that is, the cash flow of the connected projects can cover the repayment of principal and interest; Third, after 2018, China's PPP model has entered a period of steady growth, and its better support for infrastructure investment requires the improvement of relevant systems; Fourth, pay attention to whether the implicit debt supervision will be moderately loose at the sixth national financial work conference that may be held this year. The fifth national financial work conference held in July 2017 pointed out that "strictly control the increase of local government debt, lifelong accountability and backward investigation of responsibility". The driving force of local governments for supporting financing of infrastructure has become insufficient, which is the main restraining factor for the continuous downturn of infrastructure investment growth from 2018 to 2021.
The next step of infrastructure investment. At present, there are high demands for the steady growth of infrastructure investment. While coordinating medium - and long-term goals such as development and security, this meeting also took into account the short-term expansion of domestic demand and released a positive signal of steady growth. The key to determine the rebound space of infrastructure investment in the future still lies in whether the problem of infrastructure financing can be alleviated. Therefore, we need to focus on whether the comprehensive account for the return on infrastructure investment can break through the core requirement of self balancing of income in the supervision of special bonds, and whether the supervision of implicit debt of local governments will be moderately loose.