Why Can't ¥5 Trillion Stimulus Lift China's Economy? Govt Accounted for Nearly All Fixed Asset Investment Growth in 2015

The NDRC spokesman revealed the country invested 5 trillion yuan in 11 major projects in 2015 (technically 13 months having launched in November 2014), exceeding the 4 trillion yuan target. It was about 9 percent of the 55 trillion yuan in national fixed asset investment last year.

Despite this added boost of investment, fixed asset investment continued to fall throughout 2015. In fact, total fixed asset investment was only up 10% in 2015, so without the government's stimulus, growth would have been close to zero.

As the Economic Observer articles notes (五万亿为什么还拉不动中国经济?), China has never faced a situation where massive government relief has failed to stimulate growth. The EO asks, how is it that 5 trillion yuan in infrastructure investment cannot stabilize the economy? How is it that 5 trillion yuan in 13 months cannot achieve what 4 trillion yuan in 26 months was able to achieve? (Referencing the 2008 stimulus)

The recent decision to ease regulations on banks, to allow the provisions for bad debt to drop from 150% coverage to 120%, would also potentially free up 5 trillion yuan.

The key difference between 2008 and 2015 is there was less credit demand and less incentive to lend. Banks are worried about return of capital, not return on capital. The politically connected borrowers are already zombies, requiring new credit to keep from going bankrupt. Small private companies are starving for capital. The economic model has hit the wall, peak debt for the current model has been reached.

EO also notes a key difference: the spillover from the 2008 stimulus was huge. One of the core investments was upgrading China's rail network. High speed rail is the result. There were large investments made around the rail project, such as new train stations and accompanying private investment around these new transportation hubs. The spillover effects from the recent 5 trillion yuan plans were not as large. Monetary policy was more aggressive in 2008 as well, while borrowers and banks were far less impaired.

The EO article provides a rough breakdown of investment per month:
From the end of November 2014 to the end of May 2015, seven major engineering package total investment 3.1 trillion yuan. A total of six months, the average monthly investment was 500 billion.

From June 2015 to the end of October 2015, 11 categories of major projects completed an investment of 125 million yuan package. A total of five months, the average monthly investment was 250 billion.

From November 2015 to the end of December 2015, 11 categories of major projects completed an investment of 650 billion package. A total of two months, the average monthly investment was 325 billion.

December 2015 monthly, 11 categories of major projects completed an investment of 346.5 billion.
Many articles covered these investment projects last year, such as this one: China Said to Accelerate $1 Trillion in Projects to Spur GDP

At this point in 2016, the NDRC has only approved 55 billion yuan in investments. NDRC approves 55 billion yuan in investments
The National Development and Reform Commission says the Chinese central government has approved more than 55 billion yuan in investments so far this year. China's top planner said Wednesday that the country would continue to push infrastructure investment and maintain a stable job market despite stiff growth headwinds.

...The NDRC says more than 5 trillion yuan's worth of investment was issued by the end of last year, and another 55 billion yuan for more projects was approved in January.

The NDRC says the weight of the investment is on infrastructure upgrades.

"These projects focus on water and energy sectors. We want to lift people's livelihoods, including power generation and transportation," said Zhao Chenxin, Spokesman of NDRC.
55 billion in January versus an estimated 500 billion a year ago in January. Take the under on fixed asset growth estimates?

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