As iron ore prices continue the relentless slide which has seen a 20 per cent drop in the past three weeks, investors are increasingly puzzled as to why Beijing’s efforts to boost infrastructure spending have so far failed to bear fruit.
The audit report also suggests that local governments aren’t in a screaming hurry to spend the money they raise from selling bonds, with 21.7 billion yuan in special purpose bond funding in 33 regions sitting idle for more than a year. In May, shortly after the CBIRC accused the four Henan banks of being involved in illicit public fundraising, scores of bank customers converged on Zhengzhou, which is the capital of Henan province, to try to get their money returned.
According to Godement, China’s harsh lockdowns in the past few months have killed two of China’s three growth engines: household spending and exports.That leaves Beijing heavily dependent on increased investment spending – particularly on infrastructure – to drive growth.