At the beginning of the new year, major projects in multiple provinces and cities have started intensively, with nearly 3 trillion yuan of projects following one after another, and various regions are depicting a new picture of stabilizing investment.

Recently, the "Action Plan for Building a High-Standard Market System" issued by the General Office of the CPC Central Committee and the General Office of the State Council proposed to strengthen market infrastructure construction and increase investment in new infrastructure. Experts believe that in the economic recovery stage, the pace of old and new infrastructure is switching, traditional infrastructure investment is slowing down, and new infrastructure investment will gain momentum. It is expected that infrastructure investment will maintain moderate growth this year, helping the "14th Five-Year Plan" economy get off to a good start.

Blueprint for Stabilizing Investment Unfolds

Since January, major projects in Shanghai, Henan, Hunan, Guangdong, Hubei and other places have started intensively. Taking Henan as an example, the investment amount of projects started in January exceeded 577.4 billion yuan. Shanxi Province's development zones started 268 projects with a total investment of 128.86 billion yuan. Shanghai started 64 major projects with a total investment of 273.4 billion yuan. Hubei started 111 major transportation projects with a total investment of 73.6 billion yuan.

From local government work reports and local transportation work conferences, the blueprint for stabilizing investment in 2021 is slowly unfolding.

From local government work reports, for example, Shaanxi proposed to implement a batch of projects to enhance advantages and fill shortcomings in areas such as "two new and one heavy", infrastructure, public services, and agriculture and rural areas, with provincial key project investment of more than 420 billion yuan. Henan made it clear that it will continue to implement about 8,000 major projects in nine major areas including industry, transportation, and energy, and strive to complete an annual investment of 2 trillion yuan.

From local transportation-related work conferences, Guangxi made it clear that the 2021 transportation fixed asset investment target is 220 billion yuan, and it will make every effort to accelerate the construction of a comprehensive three-dimensional transportation network. Jiangsu proposed that in 2021 it will open a new situation and take new steps in expanding effective railway investment, ensuring that the annual investment is 58.2 billion yuan. Henan proposed that in 2021 it will complete more than 100 billion yuan of investment in highway and waterway infrastructure.

New Infrastructure Enters Fast Lane

From the central government to local governments, the new infrastructure boom is in full swing.

The "Action Plan for Building a High-Standard Market System" recently issued by the General Office of the CPC Central Committee and the General Office of the State Council proposed to strengthen market infrastructure construction and increase investment in new infrastructure. The National Development and Reform Commission recently stated that it will focus on "two new and one heavy" and weak links to expand effective investment. Accelerate the construction of 5G, industrial internet, big data centers, etc. The Ministry of Industry and Information Technology recently stated that it will continue to deepen 5G network construction and deployment in accordance with the principle of moderate advancement, and plans to build 600,000 new 5G base stations in 2021.

From a local perspective, new infrastructure is entering the fast lane.

At present, many places have issued implementation opinions on new infrastructure. Recently, local two sessions held successively have once again released new signals for accelerated development of new infrastructure. For example, Henan proposed that in 2021 it will accelerate the construction of a new generation of information networks and integrated integration infrastructure, build 50,000 new 5G base stations, and accelerate the implementation of projects such as big data centers. Beijing proposed that in 2021 it will promote the application of gigabit fixed networks and IPv6, and add 6,000 5G base stations. Shanghai proposed to accelerate the building of an international digital capital with world influence. Vigorously promote a batch of major new infrastructure projects.

"New infrastructure investment will become an important growth driver for this year's economy," said Fan Ruoying, a researcher at the Bank of China Research Institute. On the one hand, the impact of the COVID-19 pandemic has not yet been eliminated, and new economic growth points need to be found to maintain stable economic operation; on the other hand, China's economy is in a critical period of transformation and upgrading, and increasing new infrastructure investment is conducive to adjusting the economic structure and conforms to the general trend of transformation and development.

Ye Fan, chief macro analyst at Southwest Securities, said that although China's economic development is facing uncertainties, the digital economy led by digitalization, networking, and intelligence is outstanding and is becoming a certain direction of economic development. New infrastructure is a measure to actively conform to the new era of the digital economy and lays a solid foundation for global digital economy development competition. It is estimated that from 2020 to 2025, the total investment in key areas such as 5G networks, artificial intelligence, industrial internet, Internet of Things, data centers, cloud computing, fixed broadband, and digital and intelligent upgrading of traditional infrastructure will be about 17.6 trillion yuan, with an average annual growth rate of about 23.39%.

Infrastructure Investment

Speaking of the overall investment trend in 2021, Fan Ruoying said that infrastructure investment is an important way to boost domestic demand and promote economic growth. Considering that fiscal pressure will continue to be relatively high, the support of special bonds for infrastructure projects may weaken, and it is expected that infrastructure investment will maintain steady and moderate growth in 2021.

Lian Ping, chief economist and president of the Research Institute of Zhixin Investment, said that in the economic recovery stage, the pace of old and new infrastructure is switching, traditional infrastructure investment is slowing down, and new infrastructure investment will gain momentum. Overall, fixed asset investment will continue to grow moderately month-on-month, and considering the low base effect in the same period of 2020, the year-on-year value may show high growth.

Meng Jie believes that the funding situation will still be the core factor affecting investment growth in 2021. From the perspectives of special bonds, land transfer income, urban investment bonds, and non-standard financing, the funding situation related to infrastructure in 2021 will be tighter than in 2020.

In terms of funding sources, Fan Ruoying suggested that in addition to leveraging government investment, it is also necessary to flexibly mobilize funds from multiple parties. First, improve multi-party communication channels among government, banks, and enterprises, and encourage commercial financial institutions to solve the problem of greater funding pressure on investment projects through various methods such as debt, equity, and asset-backed plans. Second, further optimize the business environment, remove hidden barriers in credit, innovation, and bidding, increase the enthusiasm of private capital and foreign long-term capital to participate in infrastructure projects, and fully protect the rights and interests of private capital. Third, strengthen financial innovation and fully leverage the financing functions of multiple channels such as the capital market.