A local government reshuffle in the first quarter could spark a
fresh investment surge in new projects, officials and analysts
said.
The central government has appointed a slew of top officials in
Beijing, Shanghai, Chongqing and Tianjin over the past months, a
prelude to the local government reshuffle this quarter. Fresh faces
are expected to take new posts in provincial and low-level
governments.
"Newly appointed local officials may embark on a slew of
projects to spur growth," said Zhu Jianfang, chief economist of
Beijing-based CITIC Securities. "This may counteract the central
government's efforts to cool the economy."
The central government has already warned of a potential
spending spree. Zhou Xiaochuan, governor of the People's Bank
of China, said at a financial forum last month the central bank is
looking at ways to curb investment after the reshuffle.
According to Zhou, outstanding loans more than doubled
year-on-year to 1.6 trillion yuan after the last local government
reshuffle in the first half of 2003.
Local governments are a major force driving China's sizzling
growth in fixed assets such as roads, office buildings and
bridges.
In the first nine months of 2007, total investment in new
projects supported by local governments grew 27.8 percent, compared
with a decline of 0.9 percent for those supported by the central
government, according to the National Bureau of Statistics. The
bureau said local officials were embarking on large-scale
investments to realize development strategies.
"The central government has already introduced a series of
preventive measures to curb investment," said Zhu.
The central bank may adopt stricter window guidance to banks to
limit lending and review monthly loan volumes, according to
industry insiders. The central government also said it would
tighten approvals for new projects.
The State Council is set to issue a directive for new projects
in industries such as copper and coke production, the Economic
Observer reported. The new directive may mean investments in
these areas will need central rather than local government
approval.
(China Daily January 2, 2008)
