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China may try to ride the rails again to boost growth

Reuters
Can China’s super-fast trains bring back super-fast growth?​
This article is more than 2 years old.

Chinese stocks got a lift today, on reports that the People’s Republic might launch another investment push to help reduce its glut of raw materials and get the economy moving.

China Business News reported that the country may spend more than the originally planned 650 million yuan on railroad construction this year. Investors took the news to mean the Chinese government is ready to push through new stimulus projects to shore up growth. Chinese railroad stocks—and the rest of the markets— shot up. China’s Shenzhen A share index jumped 2.8%. The Hang Seng rose 2.3% in Hong Kong. And the Shanghai Composite was up about 2%.

In some ways, a fresh push to boost railroad construction makes sense. For one thing, China saw its stockpiles of steel surge in 2013, which has led to excess production.

But don’t forget, China is just coming off of a huge surge in railway construction last year. And the fact that the government has to resort to another pronounced construction push underscores concerns that China’s investment-driven economic model is running out of steam.

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