The Politburo of the Central Committee of the Communist Party of China (CPC) held a meeting on 31 July to analyze and study the current economic situation, deploy economic work in the second half of the year, and examine the regulations on Disciplinary Action by the Communist Party of China. Xi Jinping, general secretary of the CPC Central Committee, presided over the meeting. The meeting pointed out that the current economic operation has changed steadily, faced with some new problems and new challenges, and obvious changes have taken place in the external environment. This year, major changes have taken place in the domestic and foreign environment, foreign trade frictions have not yet been resolved, and domestic economic development is also facing multiple challenges. In this case, it is particularly important to take the short board in the current economic development: infrastructure (especially rural infrastructure) as the focus of deepening supply-side reform.

1. the growth rate of infrastructure investment continued to decline in the first half of the year

From January to June 2018, fixed asset investment (excluding farmers) totaled 29.7316 trillion yuan, an increase of 6 percent over the same period last year, down 0.1 percentage points from January to May. In terms of month-on-month speed, fixed asset investment (excluding farmers) grew by 0.48 per cent in June. Of this total, private investment in fixed assets totaled 18.4539 trillion yuan, an increase of 8.4 per cent over the same period last year. In the tertiary sector, infrastructure investment (excluding electricity, heat, gas and water production and supply) increased by 7.3 percent over the same period last year, 2.1 percentage points lower than in the January-May period. Among them, investment in the water conservancy management industry increased by 0.4 percent, down 3.5 percentage points, and investment in the public facilities management industry increased by 5.8 percent, down 2.8 percentage points. Investment in the road transport industry increased by 10.9 percent, down 3.9 percentage points, and investment in the railway transport industry decreased by 10.3 percent, a decrease of 1.1 percentage points.

Data from: national Bureau of Statistics

II. policy and infrastructure construction in the second half of the year

1. Policy benefits Infrastructure stocks pull up one after another

The Politburo meeting of the Central Committee of the Communist Party of China (CPC) confirmed the strength of the policy to increase infrastructure and pointed out that it was determined to curb the rise in house prices. Affected by this, infrastructure stocks have pulled up.

Cement building materials stocks rose again, Qilian Mountains (SH600720) strong trading limit, Ningxia Building Materials (SH600449), Tianshan shares (SZ000877), Jidong cement (SZ000401), Tongli cement (SZ000885) and other stocks have been pulled up.

Construction stocks strengthened collectively, the Construction Academy (SZ300675), Da'an shares (SZ300635), Construction Research Institute (SH603183), Design Institute (SH603357), North New Road and Bridge (SZ002307) and other stocks collectively rose.

2. New moves in local infrastructure investment

From the provincial disclosure, most of the projects involve strategic emerging industries, modern services, environmental protection industries and so on. in addition, infrastructure projects are also the focus.

At the end of June, the Shandong Provincial Development and Reform Commission held a major project introduction and financial support docking meeting for the conversion of new and old kinetic energy, and identified 450 optimal projects for the first batch of major projects for the conversion of new and old kinetic energy, with a total investment of 1.8 trillion yuan.

On July 5, the Gansu-Guangdong Economic and Trade Exchange Fair was held. Gansu Province has screened a total of 166 key investment projects with an investment of nearly 300 billion yuan to promote.

On July 20, the Fujian Provincial Development and Reform Commission held a news briefing, saying that 300 provincial key investment projects with a total investment of 562 billion yuan were selected and launched a few days ago.

At a press conference held by the Foreign propaganda Office of the Chengdu Municipal CPC Committee on 11 July, it was said that in order to actively create a high quality of life, the "key Plan for the Construction and Reform of Chengdu's High-quality Public Service facilities system" was put forward. Chengdu plans to implement 171 major infrastructure and livelihood projects with a total investment of 1.5072 trillion yuan.

From July 24 to 27, Hunan Province will hold a "2018 Hunan Open and strong Province Construction and key Industry Promotion Conference" in Shanghai, Hangzhou, Nanjing, Kunshan, and other places.

3. Rural Infrastructure Construction becomes a New highlight

Strengthening the construction of rural infrastructure will become an important work in the implementation of rural revitalization strategy in the coming period. It has been learned that China will carry out major infrastructure projects in many fields, such as logistics, water conservancy projects, energy, highways, and the construction of a new generation of networks in rural areas.

However, rural infrastructure and resources still lag far behind cities and towns, and there are some typical and systemic problems. Zou Lian, an expert in the Department of Economic Prediction of the State Information Center, believes that due to backward planning, narrow investment and financing channels, and insufficient capital guarantee, There are still some problems, such as poor quality of rural road construction, poor equipment of rural power grid and high cost of electricity, low proportion of centralized water supply in rural areas, the popularity of rural Internet is much lower than that of cities and towns, and the construction of rural circulation facilities lags behind seriously. These problems directly affect the growth of rural consumption demand and restrict the upgrading of farmers' household consumption structure.

4. experts disagree on the sustainability of infrastructure investment

Li Chao, chief macro analyst at Huatai Securities: infrastructure credit expansion to hedge external uncertainty will become the macro logic for a long time. In the future, if the policy is oriented to expand domestic demand and stabilize infrastructure investment, there will be opportunities in the cyclical industry of credit expansion. Although infrastructure investment fell significantly in the second quarter, it maintained an annual growth rate of 13% and 15%, as well as a rebound in infrastructure investment in the second half of the year.

Ji Chengxiang, macro analyst at the Western profit Fund: although there will be a large probability of a rebound in infrastructure growth in the future, and there may be signs of gradual stabilization of investment growth throughout the second half of the year, it is not appropriate to be too optimistic about the extent of the rebound. Leniency of credit is only responsible for the supply of funds, and it cannot promote credit creation. on the one hand, the credit creation of local infrastructure depends on funds, on the other hand, it depends on projects, and more importantly, it depends on the local government's own motive force. At present, all kinds of supervision and local debt audit have dealt a great blow to the power of local government.

Mingming, chief fixed income analyst at Citic Securities Research Department: the pace of expansion in both the manufacturing and non-manufacturing industries has slowed down due to uncertainties in the international environment and the entry of some industries into the off-season of traditional production. In particular, the manufacturing industry is facing a weak supply and demand situation in the process of slowing expansion. Active finances should be more active in the second half of the year in order to boost infrastructure investment. "Finance has introduced a number of measures to support local governments in exploring the issuance of special bonds for project income, and it is expected that in the future, there may be innovations in relying on rural revitalization, ecological environmental protection, affordable housing, municipal infrastructure construction projects, and so on." In addition, the PPP's participation in infrastructure has been widening over the past two years and will also provide funding for infrastructure construction, he said.