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[SMM interpretation] "do not rely on infrastructure projects" = infrastructure support collapsed?
May 28,2020 20:17CST
The content below was translated by Tencent automatically for reference.


Today, Li Keqiang's remarks have aroused heated discussion in the market: great changes have taken place in China's economic structure, and consumption plays a major role in driving it. Our large-scale policies do not rely on infrastructure projects, and about 70% of the funds support residents' income.

As a "ring" in the iron and steel industry chain, the author, like many people in the market, can only sadly see the five words "do not rely on infrastructure" at the first moment of seeing this paragraph:

Does not relying on infrastructure projects mean that as an infrastructure that supports the beliefs of people from all walks of life in the steel market, it is no longer difficult to carry the banner of "steel needs", and the steel market is cold?

But think about it carefully: it's not that simple-don't rely on ≠ strike ≠ stagnation.

First, the amount of new special debt increased sharply from 2.15 trillion yuan in 2019 to 3.75 trillion yuan in 2020, the highest increase in history. As an important source of capital for infrastructure construction, the increase of special debt can actually play a certain role in promoting infrastructure construction.

Second, the intensity of infrastructure investment has not been reduced this year, and even the steel consumption of infrastructure may have a small increase compared with previous years. (for details, see the SMM report: 100 million points of infrastructure, driving steel demand). Among them, the amount of investment in the railway projects with the largest steel consumption per unit is significantly higher than that in 2019. On the one hand, at a press conference held by the State Information Office a few days ago, the Ministry of Transport said that on the basis of the existing project library, a number of new projects had been put into storage, with an estimated additional investment of more than 800 billion yuan, and that construction could start in due course. On the other hand, during the process of the two sessions, it was clearly proposed that 50 billion yuan would be allocated to the China National Railway Group for the construction of high-speed and inter-city railways.

Third, the new construction and rush demand of infrastructure projects in the later stage can be expected. According to the latest survey by SMM, as of May 26, 82.35% of the infrastructure sample enterprises said they had new projects to start in the future (within three months).

Therefore, on the whole, the message that Li Keqiang greatly "does not rely on infrastructure projects" mainly conveys the country's attitude and determination to do a solid job of "six stability" and "six guarantees", and there is no need for the market to over-interpret it.


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