An introduction to infrastructure investment

Data from the National Bureau of Statistics shows that infrastructure investment in January-October grew by 4.2% year-on-year, significantly faster than the 3.8% in 2018, and the cumulative growth rate realized the first rebound in the year. As a counter-cyclical regulator of the economy, infrastructure in the January-October economic growth "bottoming" role finally revealed its true colors.

The infrastructure industry chain of steel, cement, construction machinery, "three golden flowers" to see, steel sales, cement production and sales, construction machinery continued to high boom characteristics are more obvious: 1-10 months of this year, China's apparent consumption of iron and steel (production plus net imports) amounted to 782 million tons, an increase of about 7%; by the market demand, January-October, the market demand, January-October, China's economic growth in January-October "bottoming" role has finally revealed its true colors. Market demand, January-October national cement production of 1.907 billion tons, an increase of 5.8% year-on-year, the growth rate of 3.2% year-on-year; all types of domestic excavators in the first 10 months of the total cumulative sales of 196,200 units, an increase of 14.4% year-on-year.

With the current policy for special debt funds to support infrastructure investment tilt gradually increased, coupled with the minimum capital ratio of infrastructure projects down to play a combination of punches, infrastructure is expected to usher in a new round of power.

1, special debt in advance, support infrastructure investment

Throughout the first 10 months of this year, infrastructure investment, the overall presentation of the structural differentiation characteristics: railroad investment is relatively strong, public **** facilities management industry investment, especially municipal engineering investment performance is weak. In view of this, the National Standing Committee made it clear that the special bonds issued in advance will focus on railroads, rail transit, urban parking and other transportation infrastructure in addition to urban and rural power grids, natural gas pipeline networks and other energy projects, agriculture, forestry and water conservancy, urban sewage and garbage treatment and other ecological and environmental protection projects, vocational education and child care, medical care, pension and other livelihood services, as well as cold chain logistics facilities, water, electricity, gas and heat and other municipal and industrial park infrastructure, the scope of application has been expanded.

The 1 trillion local government special bonds issued in advance, but also on September 4, the State Council executive meeting "to speed up the issuance and use of local government special bonds," the implementation of the requirements. According to the requirements of the meeting, the special bonds issued in advance of the amount will not be used for land reserves and real estate-related areas, and not for the replacement of debt and can be fully commercialized industrial projects, so the special bonds will be more focused on infrastructure investment, and it can be expected that the actual pulling effect of the infrastructure will be significantly enhanced.

It should be noted that the special debt quota from the issuance of the final process to complete the formal issuance of the program, still need a certain amount of time, so the positive effect of the policy hedge for infrastructure investment may be in the beginning of next year in order to clearly reflected. But part of the industrial raw materials may be in the fourth quarter of this year began to vigorously production, as evidenced by the recent steel stocks continue to decline as well as cement prices continue to rebound.

2, capitalization ratio down, help infrastructure recovery

June in **** Central General Office, the General Office of the State Council issued a "notice on the issuance of special bonds of the local government and the project supporting the financing of the work", allowing the special bonds as eligible capital of major projects after the State Council, the State Council, "on the strengthening of the capital management of fixed asset investment projects notice downward adjustment of the minimum capitalization ratio of infrastructure projects, once again tilting the policy toward infrastructure.

Adjustment of the minimum capital ratio of the project, for the adjustment of infrastructure investment structure is beneficial: the current transportation, water conservancy, energy, ecological and environmental protection, social livelihoods and other infrastructure areas there are still a lot of short boards, these complementary short boards of infrastructure projects the minimum capital ratio of the decline will reduce the amount of capital demand in the project investment, to attract the special bonds, private capital to participate in infrastructure projects.

Adjustment of the minimum capital ratio of the project can significantly promote the high-quality development of infrastructure investment: on the one hand, the decline in the minimum capital ratio of infrastructure projects will fully mobilize social capital to participate in the relevant areas of infrastructure investment enthusiasm, improve the investment capacity of social capital, support to make up for the short boards, and expanding domestic demand; on the other hand, if inland waterways, coastal, highways, railroads, ecological and environmental protection projects can realize the capital ratio down 5%, is expected to pry 1.19 trillion yuan of incremental capital.

3, the policy market linkage, infrastructure power to stabilize growth

Currently, the infrastructure project started to pick up signs have appeared. Transportation infrastructure construction, for example, the recent Guizhou, Yunnan, Sichuan, Henan, Shandong, Jiangsu and other provinces have entered the intensive construction phase, "iron, public transport" (railroads, highways, airports), as well as urban rail and other projects to start the tide. With the gradual availability of funds, the subsequent infrastructure projects will be expected to focus on the release of demand.

At the same time, 5G, big data, artificial intelligence, cloud computing, industrial Internet and the Internet of Things and other "new infrastructure construction" projects are gradually entering the policy to encourage the scope of investment highlights. This year, Beijing, Shaanxi, Guangdong, Fujian and other provinces have deployed a new infrastructure construction, and "new infrastructure" investment model is more flexible, for market players have many opportunities.

With the implementation of the two financial counter-cyclical policies of special bonds and capital management, the financing capacity of infrastructure projects will be significantly improved, and the growth rate of infrastructure investment in 2020 is expected to rebound significantly. In the policy measures to break the bottleneck of infrastructure investment in the macro-environment, the market enthusiasm will continue to rise, the current market on the cycle of the plate is a high degree of attention is the best example.

Looking ahead to 2020, infrastructure will be an important support for economic growth, with the "iron and public infrastructure" as the representative of the traditional infrastructure, as well as "infrastructure to fill short boards", "new infrastructure construction "Medium- and long-term projects are expected to boost the economy. Of course, in addition to the substantial "increase", continue to "improve efficiency" is still the focus of infrastructure development, make up for the short board of investment, improve the efficiency of investment, should be the focus of the next phase of counter-cyclical adjustment.

Under the pressure of economic downturn, the current infrastructure investment by the local financial resources and strict control of hidden debt constraints. Early issuance of special bonds and reduce the proportion of project capital, help infrastructure projects to expand the scale of investment, strengthen the counter-cyclical adjustment. Of course, the high hopes of the infrastructure investment can win back the market expectations, is still pending the timely landing of the policy, the precise implementation of supporting measures.