Infrastructure remains the lone bright spot when dealing with the return of China's economy. This has led to China being overly reliant on it, although there are concerns where this will lead; the crackdown on local government borrowing remains a factor in the Chinese economy becoming a force to be reckoned with yet again.
Financial Times reports that infrastructure-most especially fixed-asset investment-had 21.4 percent growth in July. In contrast, real estate hit 17.7 percent in growth. Fixed asset had remained the biggest asset in China's return to prominence in the economy. There had been other drivers like investments in real estate and other economies, but this, so far, had been China's GDP secret-to the tune of 45 percent growth. The US shares are 22 percent, while Japan's had posted 30 percent growth.
However, there will always be skeptical voices, and Shen Jianguang, an economist covering China at Mizuho Securities, is that voice in this case. He says that this cycle still remains to be seen. There are many ways that governments fuel economies and infrastructure is China's policy. However, there are other factors, like disputes, wrong policies, and others that could still affect this growth.
These factors include countries like Malaysia, whose economic policies have changed in since a new government is installed. China has been going around, convincing economies with their Silk Road Initiative, or more commonly known as the "One Belt, One Road" policy. The former Malaysian government, riddled with scandals as it was, had been a staunch supporter of working with China on this initiative.
However, the new Mahathir Mohamad-led government, Business World says, espouses a review of existing policies that the government had with other countries, including China. All lopsided contracts will be rejected. Some of these are allegedly one-sided Chinese contracts, but mostly, Malaysia just wants bad contracts rescinded and their focus to shift to building their scandal-wracked government.
China has its own financial issues to focus on, and this involves mainly looking after the reported "invisible borrowing" by corrupt government officials. Money spent is money earned, and China aims to continue its infrastructure drive by creating more legitimate channels to fund finances on-this includes local government bond sales, which could funnel money through legal ways.
