China to Set Up a $75 Billion Infrastructure Fund to Reaccelerate Economy Growth

© Reuters.

By Senad Karaahmetovic

China plans to launch a 500 billion yuan ($74.69 billion) infrastructure investment fund in an effort to drive infrastructure spending and revitalize its economy, according to a report by Reuters.

Even though China’s economy has shown some signs of recovery recently after seeing damage from supply chain constraints due to coronavirus lockdowns, key challenges that are impeding the country’s growth remain including weaker consumer spending, quiet property market, and concerns over a new wave of infections.

The new infrastructure investment fund is reportedly expected to launch in the third quarter. Over the past few weeks, Beijing has introduced a series of fresh measures aimed at revitalizing its economy, though analysts think it will be difficult for China to reach its gross domestic product (GDP) target of about 5.5% without abolishing its zero-COVID policy.

China’s economy has been mainly helped by fiscal stimulus measures that were introduced to weather the coronavirus impact, while The People's Bank of China (PBoC) continues to ease liquidity continues to reduce financing costs.

Now, the government decided to step up its efforts in infrastructure investing, promising 800 billion yuan in new credit quota and 300 billion yuan in financial bonds.

While China is doing well in controlling consumer inflation and providing enough leeway for policymakers to spur economic growth, some analysts are warning that global cost-push factors could emerge in domestic prices in the second half of 2022.