China is set to push ahead with a vast infrastructure programme which will boost economic growth as the leadership change takes place, the ceo of US aluminium producer Alcoa said. “The next injection will be infrastructure driven, and the good news is that those projects are shovel-ready, as the government stopped some of them when it was worried the economy would overheat,” Klaus Kleinfeld said.
“The reason they didn’t go for an infrastructure programme earlier is that they were worried about inflation rates in China, which basically means consumer prices – including food, which tends to lead to unrest.”
Thursday November 8 marks the start of a once-in-a-decade leadership change in China, as the 18th National Party Congress gets underway in Beijing.
The actual Chinese government change is not slated to take effect until March 2013, but the new leaders will emerge before this.
Pundits are tipping Xi Jinping and Li Kegiang to succeed Hu Jintao and Wen Jiabao as President and Premier.
Many metals market investors are hoping the new regime will resume stimulus plans that have fallen away in recent months, slowing the country’s exponential growth.
“I had a chance to spend a week in China a couple of weeks ago and pretty much saw the top existing leaders and some of those that most likely will be in the top new guard, and talked with them about their views on what they’re doing to the economy now,” Kleinfeld said.
“I’m optimistic that you’ll see the impact of the change and the new programmes already shining through at the end of the year in their numbers, so I think China is going to continue to be a very positive growth story,” he added.
Kleinfeld said he expects the transition to go “relatively smoothly”, and that China’s leaders are clear on what they need to do to keep its natural resources sector running efficiently.
This will include reining in overcapacity and preventing the waste of resources that are in short supply, including energy, he noted.
“I believe once the new people are in their seats, the ripple-through effect on the whole system is probably going to be over by the end of the year, and you’ll see these things unfolding,” he added.