Premier Li Keqiang delivered the Government Work Report at the Fourth Session of the 12th National People's Congress in Beijing on the 5th, laying out systematic plans for this year's government work. In the report, Premier Li Keqiang stated that this year a batch of major projects under the “13th Five-Year Plan” will be launched. Railway investment of more than 800 billion yuan and highway investment of 1.65 trillion yuan will be completed, 20 more major water conservancy projects will break ground, and major projects such as hydropower, nuclear power, ultra-high-voltage power transmission, smart grids, oil and gas pipeline networks, and urban rail transit will be built.

　　CSC Financial believes that the core of the 2016 government work is “stability,” and steady growth relies on investment. Of that investment, 80% comes from manufacturing, real estate, and infrastructure. From the demand side, China's infrastructure still lags far behind developed countries and is unevenly distributed, so infrastructure construction still has great potential. It is expected that during the 13th Five-Year Plan period, to achieve annual GDP growth of more than 6.5%, infrastructure investment growth will need to expand somewhat, and may be maintained at around 20% per year.

　　In the rebound that began on January 28 this year, the infrastructure sector was somewhat undervalued, and earlier oversold losses have not been recovered. The transportation sector rose only 6.4%, in sharp contrast to the 24.7% gain in the nonferrous metals sector. Based on current valuations, the infrastructure sector's valuation is also within a safe range and has a certain level of support, so the infrastructure sector may see a rally in the future.

　　Railway construction is the focus of infrastructure, and investment is expected to exceed budget

　　As the leader in transportation infrastructure projects, railways will certainly play the role of an investment stabilizer in the opening year of the 13th Five-Year Plan, so as to stabilize the growth of total infrastructure investment. In 2016, the growth rate of railway fixed asset investment may remain at around 10%. Based on the 823.8 billion yuan of completed national railway fixed asset investment in 2015, the 2016 figure may exceed the budget and reach about 906.1 billion yuan, hitting a historic peak in railway investment. In summary, this year's railway industry chain is expected to achieve certain excess returns under relatively high investment growth. Investors may watch China Railway Group, China Railway Construction, China Railway Erju, CRRC, China Communications Construction, Tunnel Engineering, Tielong Logistics, Daqin Railway, Guangshen Railway, and Shanghai Shentong Metro, among others.