Investment 'half-year report' highlights strong new momentum; a batch of strategic and leading major projects accelerates implementation

The investment 'half-year report' highlights strong new momentum in the economy. In the first half of 2021, fixed asset investment continued to recover steadily, and the investment structure was further optimized. Among them, investment in high-tech industries, especially high-tech manufacturing, grew significantly, and the transformation of old and new drivers in manufacturing accelerated. Reporters learned that in the second half of the year, steady investment will be further strengthened. Recently, intensive deployments have been made from the central to local levels to increase efforts to shore up weak links, jointly expand effective investment, and sound the charge for a new wave of major projects. Analysis points out that in the next stage, with the deployment and implementation of a batch of strategic, foundational, and leading major engineering projects and the steady progress of this year's new local government special bond issuance, investment is expected to continue its restorative growth trend.

Investment recovers steadily

Structural optimization highlights new momentum

In the first half of 2021, fixed asset investment continued to recover steadily, and the investment structure was further optimized. Among them, investment in high-tech industries, especially high-tech manufacturing, grew significantly, highlighting strong new momentum in the economy.

According to data from the National Bureau of Statistics, in the first half of the year, national fixed asset investment (excluding rural households) was 25.59 trillion yuan, a year-on-year increase of 12.6%, and a month-on-month increase of 0.35% in June; the two-year average growth was 4.4%, 1.5 percentage points faster than the first quarter. By sector, infrastructure investment grew by 7.8% year-on-year in the first half, with a two-year average growth of 2.4%, slightly lower than January-May; manufacturing investment grew by 19.2% year-on-year, with a two-year average growth of 2.0%, 1.4 percentage points faster than January-May; real estate development investment grew by 15.0% year-on-year, with a two-year average growth of 8.2%, slightly lower than January-May.

It is worth noting that investment in high-tech industries grew rapidly, and the key role of investment in optimizing the supply structure was further brought into play. Data shows that in the first half of the year, investment in high-tech industries grew by 23.5% year-on-year, with a two-year average growth rate of 14.6%, 4.7 percentage points faster than the first quarter. Among them, investment in high-tech manufacturing grew by 29.7%.

Wang Qing, chief macro analyst at Orient Golden Credit, said that the momentum of manufacturing investment recovery accelerated in the second quarter. There are two direct reasons behind this. First, recent increases in industrial product prices have improved profits in mid- and upstream industries, and the stimulating effect on manufacturing investment is gradually emerging. Second, in the 14th Five-Year Plan, consolidating the foundational status of manufacturing and promoting its transformation and upgrading have been identified as the focus of macroeconomic management in the next stage. It is expected that the cumulative investment growth rate in manufacturing for the whole year will become one of the important drivers of economic growth in 2021.

Intensive deployment by central and local governments

Major engineering projects accelerate implementation

In the second half of the year, steady investment will be further strengthened. Recently, intensive deployments have been made from the central to local levels to increase efforts to shore up weak links, jointly expand effective investment, and sound the charge for a new wave of major projects.

The recent State Council executive meeting finalized the task list for advancing major engineering projects in the 14th Five-Year Plan. The meeting required that the construction of major engineering projects be promoted, and while giving full play to the foundational role of consumption, the key role of effective investment should be better leveraged. The Outline of the 14th Five-Year Plan identifies a batch of strategic, foundational, and leading major engineering projects, involving key areas such as scientific and technological breakthroughs, infrastructure, ecological environment construction, shoring up weak links in people's livelihood, and cultural inheritance and development. It is necessary to coordinate medium- and long-term development with annual economic operations, focus on promoting the construction of major engineering projects, strengthen policy support and factor guarantees, reasonably grasp the investment intensity for this year and next, and adjust appropriately in light of changing circumstances.

Local levels are also stepping up deployment to implement annual and medium- and long-term investment targets. Recently, Henan Province held a special meeting on implementing the province's major project construction, pointing out that projects in the 'put into production' category should be completed within the quarter, and under the premise of ensuring safe production and project quality, efforts should be made to accelerate construction progress.

The Qinghai Provincial Development and Reform Commission recently stated that it is necessary to seize the critical moment of the province's golden season for concentrated efforts, and coordinate the province's major projects' centralized start and resumption of work. A total of 2,341 projects, including Xining University, Maerdang Hydropower Station, the reconstruction of the G109 Xiaoxiakou section, and multi-energy complementarity and source-grid-load-storage integration, started in the first half of the year, with an estimated investment of over 500 billion yuan. The start rate of 190 provincial key projects reached 84.2%, providing strong support for steady investment. Next, the comprehensive coordination function will be further brought into play, services will be optimized to ensure factors, the 'approval ice-breaking' for investment will be deepened, and the progress of major project construction will be fully accelerated.

Wu Youhong, director of the Investment System and Policy Research Office of the Investment Research Institute of the Chinese Academy of Macroeconomic Research, pointed out that major engineering projects play a ballast role in the sustainable growth of effective investment and high-quality economic and social development. The active promotion of major project construction from the central to local levels will, while giving full play to the foundational role of consumption, better leverage the key role of effective investment, promote the sustained and steady recovery of fixed asset investment, and continuously optimize the structure.

Strong support

Investment expected to continue restorative growth

Analysis points out that in the next stage, with the accelerated implementation of major projects and increased fiscal support, investment is expected to continue restorative growth.

Zhai Shanqing, director of the Investment Department of the National Bureau of Statistics, said that in the next stage, with the deployment and implementation of a batch of strategic, foundational, and leading major engineering projects identified in the Outline of the 14th Five-Year Plan and the steady progress of this year's new local government special bond issuance, investment will continue to maintain a restorative growth trend.

Liu Xuezhi, senior macro analyst at Bank of Communications, said that special bond issuance is expected to accelerate in the second half of the year. From the perspective of special bond issuance, from January to May, 1.17036 trillion yuan of local government special bonds were issued, completing 32.1% of the annual plan. The annual plan is to issue 3.65 trillion yuan of special bonds, and the remaining 2.48 trillion yuan has not yet been used, which will provide positive support for economic growth in the second half of this year and next year. Special bond issuance will accelerate in the second half of the year, promoting infrastructure investment growth. With policy support, new infrastructure has a good growth momentum, and infrastructure construction related to 5G, ultra-high voltage, new energy, and the Internet of Things will continue to grow rapidly. This year is the first year of the 14th Five-Year Plan, and infrastructure construction such as new urbanization, major transportation and water conservancy projects, and regional coordinated interconnection will also accelerate.

The 2021 second-half macroeconomic outlook report recently released by Zhixin Investment Research Institute also shows that fiscal expenditure will increase in the second half of the year, and the speed of special bond issuance is expected to accelerate, providing significant support for infrastructure investment, especially 'two new and one heavy' and new infrastructure investment. From the perspective of special bond investment, the proportion of bonds for projects such as broad infrastructure, urban and rural development, medical and health care, and ecological environmental protection is expected to rise steadily.

In addition, Wu Youhong said that it is expected that the price increase of means of production will peak in the middle of the year and then tend to fall in the second half of the year, which will weaken the impact on costs and profits of downstream industries. Coupled with the liquidity impact released by the comprehensive reserve requirement cut, it will help stimulate investment demand in manufacturing and other fields.