Standard Chartered Bank (SCB) said this week that while the demand pick-up has not fully trickled through the economy, forward-looking indicators are encouraging.
“Infrastructure investment was the main driver of investment growth, picking up 22.5% year-on-year from 12.7% in October 2014, suggesting that accelerated infrastructure project approvals and fiscal support have led to a turnaround in construction activity,” SCB said.
Data from FE Analytics show that the top five performing Chinese equity funds allocate between 7.9% to 31.8% of their holdings to the industrial sector, which includes rail and road construction.
Edmond de Rothschild Asset Management said in a note to its investors: “218 fixed-asset investment projects have been approved in the third quarter of this year with the total exceeding 1.81trn yuan ($285.33bn), comparing with 1.6trn approved in the full-year 2014.”
“For the fourth quarter of this year, we believe there might be further liquidity loosening and accelerating of infrastructure projects,” the firm added.
Aidan Yao, senior emerging market economist at AXA Investment Managers said late last month that he remains cautious about private-sector investment in the infrastructure segment. Yao noted that while a pick-up in credit growth could lead to near-term improvement in growth figures, he does not think this is a sustainable trend given the overhanging problems of overcapacity and weak demand.
Yao is more optimistic when commenting about public-sector investment. He noted that government spending on infrastructure is leading China’s recovery, with indicators such as car sales, air passenger traffic and growth in vehicle production signaling that domestic demand is steadily improving.
“On the public side, we think growth in infrastructure construction will likely remain buoyant for the coming months,” Yao said.