Recently, infrastructure investment has “gained new momentum”. Many regions have announced investment plans for major projects to “shore up weak links” in the second half of the year, with a scale reaching trillions of yuan; investment in railway locomotives and rolling stock and related infrastructure is accelerating. Stimulated by this, industry insiders predict that fixed-asset investment in railways will return to more than 800 billion yuan in 2018. It is worth noting that urban rail transit planning approvals, which had stalled since August 2017, have recently restarted. A new round of rail transit plans for Suzhou and Changchun has been approved by the National Development and Reform Commission. Funding support is keeping pace. The Ministry of Finance recently issued a document requiring acceleration of the issuance and use of local special bonds. This year, 1.35 trillion yuan of local government special bonds are expected to be issued; about 150 billion yuan was issued in the previous seven months, and the remaining 1.2 trillion yuan may be issued in concentrated fashion in the coming months.
　　At present, many industry insiders believe that there is limited room for China to further “ramp up” infrastructure. For example, taking “railways, highways and infrastructure” (tie-gong-ji), which have developed rapidly in recent years, according to the 2017 Statistical Bulletin on the Development of the Transport Industry published by the Ministry of Transport, China's total highway mileage in 2017 was 4.7735 million km, with a density of 49.72 km per 100 square km, exceeding the 2007 planning target by 60%; construction of highways below Class II is excessive. Looking at airports, according to the 2017 Statistical Bulletin on Civil Aviation Airport Production published by the Civil Aviation Administration of China, there were 229 civil aviation (certificated) airports in China in 2017, with annual passenger throughput of 1.15 billion person-times, up 12.9% year on year. There were 32 airports with annual passenger throughput of 10 million person-times, accounting for about 78.5% of total passenger throughput, while airports with annual throughput below 3 million person-times numbered as many as 179, accounting for only 8.9% of total throughput. Passenger throughput is clearly concentrating in “top-tier” airports.
　　Every 10 years, China has a major infrastructure investment wave. In the 1998-1999 round of infrastructure construction, although there was consideration of responding to the impact of the Asian financial crisis, objectively speaking, investment promotion in various regions was in full swing at the time, and urbanization was also starting rapidly, creating huge demand for infrastructure. At the same time, under the long-term planning framework of a “construction-led” economic model, accumulated infrastructure arrears were severe. However, infrastructure investment at that time was not large. Considering the fiscal difficulties of governments at all levels, including the central government, infrastructure funds were raised by the Ministry of Finance issuing 100 billion yuan of government bonds to the four major banks—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank—with priority invested in five areas: farmland water conservancy, transport and communications, underground pipe networks, urban and rural power grids, and directly affiliated grain reserve depots. Of this, 35.8 billion yuan went to farmland water conservancy (considering the 1998 floods).
　　The 1998-1999 infrastructure investment did not solve the problem of “arrears” in public facilities. In 2008-2009, the state launched the “4 trillion yuan investment”, starting a 10-year infrastructure investment drive focused on major projects to “repay arrears”, with priority on five aspects: infrastructure (“railways, highways and infrastructure”, etc.), post-disaster reconstruction, livelihood projects (affordable housing, rural livelihood projects), technological transformation, energy conservation and emissions reduction, and social undertakings (education, health, culture). The 4 trillion yuan was invested in these five aspects as 1.5 trillion, 1 trillion, 770 billion, 370 billion, 210 billion and 150 billion yuan respectively; major projects such as “railways, highways and infrastructure” and affordable housing projects accounted for more than 56%. Infrastructure investment grew 22.7% in 2008 and 42.2% in 2009; the average growth rate over these 10 years (2008-2017) reached 19.3%.
　　At present, infrastructure focused on major projects has been put in place, and the notion that “to get rich, first build roads” should change. Based on activating domestic demand and economic transformation, building an inclusive society, and solving social problems caused by the wealth gap, the focus of new infrastructure should be on “livelihood weak links” dominated by social undertakings. For example, China's urban sewage treatment rate is 90%, while rural areas are only about 10%; for another example, Yunnan, Guizhou, Shaanxi and Gansu alone have 216 poor counties, and all underdeveloped areas have huge shortcomings in gas and heating supply, primary medical care and other facilities; for example, in developed or densely populated areas, drainage pipe networks, underground utility tunnels, rail transit connecting peripheral areas and integrated public services in metropolitan areas, and new industries such as information, logistics and 5G all create huge demand for infrastructure.
　　The focus of this round of infrastructure is on “shoring up weak links” in social undertakings such as targeted poverty alleviation, rural revitalization, new infrastructure, and ecological and environmental protection. In recent years, the fiscal expenditure structure has tended to optimize: investment in traditional infrastructure represented by transport has declined, while investment in “shoring up weak links” in social undertakings has rebounded. In the first half of 2018, the fastest-growing fiscal expenditures were poverty alleviation, science and technology, debt repayment, energy conservation, social security and employment, and medical and health care, with growth rates of 39.7%, 25.4%, 19.0%, 16.3%, 11.3% and 9.8% respectively. In terms of funding, the main source is 1.35 trillion yuan of local special bonds with “earmarked funds for designated purposes”. Under the framework of the “new asset management rules”, it is unlikely that implicit guarantees will tolerate financing platforms' irregular financing supported by the property market. In addition, property market regulation has been comprehensively strengthened, and policy and funding have tightened, building a “firewall” between infrastructure and the property market. Of course, a virtuous cycle between real estate and infrastructure is supported, that is, space value appreciation feeds back into infrastructure investment and maintenance, such as comprehensive railway development.