China is ramping up spending in infrastructure and real estate and leaving zombie factories and loss-making steel plants to wither and die.
Investment in industries hit by chronic overcapacity is drying up quickly, Reuters reports.
In mining, it tumbled 18 percent in the first quarter from a year earlier, the most since at least the second quarter of 2004.
Investment in manufacturing grew just 6 percent, the slowest in the same period, according to the latest data from the National Bureau of Statistics.
In recent years, miners and manufacturers had tapped easy-to-access bank credit and government subsidies to fire up production even as demand began to wilt.
But in a landmark move, Beijing has ordered the closure of debt-ridden zombie firms as its policy priority for 2016.
In contrast, first-quarter investment in infrastructure and real estate surged 19.6 percent and 6.2 percent, respectively.
China will invest US$11.9 billion in aviation infrastructure this year alone, fueled by massive borrwing.
It has also approved a 27.4 billion yuan (US$4.22 biliin) high-speed rail project linking Beijing’s new airport with neighbouring Hebei province.
In real estate, China’s March home prices rose at the fastest clip in almost two years on the back of a boom in top-tier cities amid easy bank credit.
To boost infrastructure investment, Beijing has given local governments its blessing to raise funds in the bond market, much of it through local government financing vehicles (LGFVs) that skirt official spending limits.
LGFVs have raised tens of billions of dollars through bonds in the first quarter, according to brokerage estimates, even as China sceptics warn of another debt bust.
The AA-rated LGFV issuances have appealed to investors increasingly unsure of the quality of corporate paper.
Overall local government bond issuances in the quarter were 955.4 billion yuan, according to investment firm China International Capital Corp.
Investment in infrastructure and real estate is more organised and demand-based this time, and will have a better chance of success than more speculative developments in the past, some economists say.
In Guizhou, a poor province in southwestern China, there are plans to finance a 1.2 billion yuan athletic culture park and a stadium and gym complex about twice the size of Europe’s largest soccer stadium that is home to Barcelona football club.
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