The overcapacity pressures on some industries in China, such as iron and steel and cement, are likely to be eased when the government shifts the priority in infrastructure investment to the countryside in the coming five years. Economist Ma Xiaohe said this is a strategic adjustment in China’s social and economic development, and will have far reaching influences on the trend of the national economy.
More public spending to facilitate rural infrastructure construction will greatly lower the production and living costs of farmers, which in turn will help increase farmers consumption and expand domestic demand. Besides, as Chinese Premier Wen Jiabao said on March 5 when delivering his report on the work of the government at the Fourth Session of the Tenth National Peoples Congress, the government will increase input in agricultural production.
Many experts hold that as large-scale infrastructure construction in China’s urban areas has basically been completed, it is now in time and necessary to shift the focus of investment to vast rural areas. This will help narrow the gap between urban and rural areas in public utilities and create a huge market for digesting the excessive capacities in some industries like steel and cement, and easing the export pressures.