Policy banks to ramp up infrastructure support by end-September
Policy banks are preparing to support a new wave of infrastructure investment.
ICYMI: In June, Bloomberg reported that China Development Bank, Export-Import Bank of China, and the Agricultural Development Bank of China had been authorized to invest RMB 500 billion of equity in infrastructure projects.
On Monday, Caixin cited unnamed sources as saying the policy banks could start deploying those funds by end-September.
Some context: In China, infrastructure projects must secure 15%-20% of total project funding before applying for loans and breaking ground.
- This capital is typically provided by local governments – but with many of them strapped for cash, some projects have struggled to get off the ground recently.
More context: In H2 2022 policy banks provided RMB 740 billion in seed capital for infrastructure projects – reportedly unlocking RMB 3.5 trillion in total project financing.
- They raised the funds by issuing bonds and borrowing from the central bank.
Caixin reports that this time 20% of the funds must be invested in projects involving private sector participation. The funds will be deployed toward:
- The digital economy
- Artificial intelligence
- Drones and flying cars
- Consumer infrastructure
- Green and low-carbon technologies
- Agriculture
- Transportation and logistics
- Industrial parks
Get smart: Infrastructure investment shrank in both July and August, on a y/y basis – the first outright contraction since the pandemic.
- With the economy looking markedly weaker in H2 2025, this new spending will give growth a much-needed boost.
The bigger picture: This isn’t the old investment playbook focused on real estate, highways, and bridges.
- Directing funds into AI, green tech, and consumer services signals Beijing wants infrastructure to do double duty – stabilizing growth today while upgrading the economy for tomorrow.