China May Cut Spending on Strategic Industries

Reuters reports planned cuts to state investment in strategic industries including high-speed rail and wind power, as well as other forms of green energy and information technology.

Beijing originally planned to invest up to $1.5 trillion over the next five years in the seven sectors, hoping they would grow into a pillar of economic growth and help shift the world’s second-largest economy away from one centered on manufacturing cheap goods.

The pullback on spending stems partly from worries about corruption in the country’s high-speed rail project and overcapacity concerns in the wind power sector, said two sources with ties to China’s Communist Party leadership and knowledge of the plan ….

Analysts welcomed the news, which could mean less borrowing by local governments and faster consolidation of sectors like wind power ….

Shao Bingren, committee vice chairman for a top parliamentary advisory body, has warned the wind power industry is already suffering from overcapacity. The state planning National Development and Reform Commission and the National Energy Administration plan to build seven wind power plants in western China with generation capacity of at least 10 million kilowatts each, according to the country’s 12th five-year plan. But critics say these projects could be ill-advised — requiring heavy spending in power grids because wind and solar power plants are located mainly in western, inland regions, while the manufacturing bases are concentrated in faraway coastal provinces. “Many investors and local governments are not mentally prepared and think new energy is all-purpose, clean, conforms with the country’s needs and very profitable,” Shao wrote.

See also: Wind Direction Unchanged by US Trade Victory Over China and China Backtracks on High-Speed Trains, via CDT.