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Report: China to increase railway spending by $10B to ease trade-war impact

Beijing plans to increase spending on railway construction by nearly $10 billion from its initial budget for 2018 in a bid to stimulate the economy amid the growing risk of a downturn as its trade war with the U.S. escalates, The Nikkei of Tokyo reported Aug. 14.

China's economy is showing signs of a slowdown, with fixed-asset investment in the seven months ended July growing 5.5% year over year to 35.580 trillion yuan, 50 basis points slower than in the first half and the weakest since early 1996. In 2008, China also invested heavily in railway construction to help it recover quickly from a global economic downturn.

State-owned China Railway Corp. said it would increase its railway construction budget for the year to more than 800 billion yuan, up 68 billion yuan, or 10%, from an initial budget of 732 billion yuan. The expansion plan is being implemented ahead of the company's original schedule in 2020 or later.

A 100 million yuan increase in spending on high-speed railway projects would generate 3,300 tons of demand for steel for use in bridges and rails, according to a railway industry official. Based on this estimate, the latest spending boost is expected to raise steel demand by 2 million tons, or more than the 1.2 million tons China exported to the U.S. in 2017, the publication noted.

The Chinese finance ministry has also pushed local governments to speed up the issuance of special bonds for infrastructure projects over the next couple of months, Reuters reported the same day. Local governments are allowed to issue 1.35 trillion yuan of such bonds in 2018.

The ministry said local governments should complete no less than 80% of their special bond issuance quota by the end of September, with the rest to be sold in October.

As of Aug. 14, US$1 was equivalent to 6.88 Chinese yuan.