Long-Term Trajectory

The bulk of the 4 trillion yuan will be spent on projects whose contractors hail from state-owned companies in the steel, cement and energy sectors. Light industries – those hardest hit by the global recession – expect few benefits.

“The state investment plan is sunshine for heavy industries and SOEs, but can not shield light industries and SMEs,” said Shen Minggao, Caijing chief economist. “This is likely to aggregate the tendency for China to become more dependent on heavy industry.”

Banks may tend to issue loans for large investment projects, which could restrict credit options for private enterprises.

Meanwhile, an investment-led economic stimulus may further entrench China’s old pattern of economic growth. According to the NDRC executive plan for 2009, submitted to NPC, fixed asset investment is expected to grow 20 percent, while retail consumption will likely only increase by 14 percent. This means that the consumer share of the economy, already far below desireable levels, could shrink more.

NPC Standing Committee Chairman Wu Bangguo said three indexes – the value-added services sector, service sector employment, and research and development -- did not reach previous targets. At the same time, he said, indexes for energy consumption and waste emissions have a long way to go before meeting the nation’s goals set in the most recent five-year plan.

 “Our economic development pattern has not fundamentally changed, so our industrial structure is still heavy-industry oriented and our demand structure is still export- and investment-oriented,” Wu said. “Resources and the environment are under pressure. Unemployment and weak consumption levels are still outstanding issues.”

1 yuan = 14 U.S. cents

Full  A rticle in Chinese: http://magazine.caijing.com.cn/2009-03-16/110120926.html