Infrastructure in China

With inflation no longer a concern, both the central and provincial governments have a large volume of shovel-ready projects already on the books, and a significant portion of the RMB4 trillion stimulus package is going to the projects that were already slated for government funding.

For example, in 2008 the Ministry of Railways had originally planned to invest RMB300 billion in basic construction projects. However, Ministry of Railways Director Zhang Zhongmin told China Business News that in order to stimulate internal demand, the railway decided to add another RMB50 billion in 2008. In 2009, the ministry has nearly doubled its expected investment, allocating RMB600 billion for basic rail construction.

Future railway development will focus mainly on the construction of passenger and regional express rail lines and the reinforcement of heavily used main corridors such as the Beijing-Guangzhou, Beijing-Harbin and Beijing-Shanghai lines.

Director Yang has said the passenger lines between Beijing and the cities of Harbin, Shanghai and Guangzhou, and lines in the South China will be finished in three to five years and will constitute ?China?s express network,? connecting 70 percent of all Chinese cities with a population greater than half a million.

China?s investment in transport infrastructure has also halted declines in cargo traffic in the Yangtze River Delta. Cargonews Asia reported that the major ports along the Yangtze trunkline reported a year-on-year cargo throughput increase of 5.7 percent in January, the first monthly rise since August of 2008. Container throughput increased 19.6 percent to 550,000 TEUs, compared with 8 percent in November and 14 percent in December. According to the report, higher levels of government spending to construct railways, roads, bridge and subways are driving the demand for imported iron ore and steel, two major commodities shipped down the Yangtze.

China imported 443.7 million tons of iron ore in 2008, and that number is expected to increase as infrastructure construction ramps up. In late February, Australia’s third-biggest iron-ore miner, Fortescue Metals Group Ltd, agreed to quadruple its iron ore sales to Xiangtan Steel, an arm of Chinese steel maker Hunan Valin Iron and Steel Group. Fortescue said that, subject to production expansions, it would increase its supply to up to 4 million tons a year from 2010 onwards, up from the current 1 million tons a year.
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