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China’s fiscal dilemma stifles infrastructure steel demand

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13 August 2019

China’s fiscal dilemma stifles infrastructure steel demand

Report summary

China’s fiscal system has gone through a structural change, which has made financing infrastructure more difficult. As a result, infrastructure investment growth in H1 2019 was only 4.1%, around half the level we expected. China now faces a new fiscal dilemma: it cannot cut taxes, reduce debt and increase spending in infrastructure at the same time. This is likely to have a far-reaching effect on steel and iron ore demand. Although we believe infrastructure steel demand will recover, it is unlikely to reach a level significantly above GDP growth, even with more supportive policies

Table of contents

Tables and charts

This report includes 8 images and tables including:

  • Infrastructure investment growth (year-on-year) is far below our expectations
  • Infrastructure steel demand scenarios (in 2019)
  • Any swing in infrastructure investment growth could have a significant impact on steel and iron ore demand
  • VAT and land sales are major sources of government income. Both are facing challenges to grow
  • Government revenue and expenditure are slowing (% ch.)
  • The trend of land sales
  • China has allowed more special-purpose bonds in 2019
  • Monthly issue of local government special-purpose bonds

What's included

This report contains:

  • Document

    China’s fiscal dilemma stifles infrastructure steel demand

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