China’s reliance on infrastructure to drive overall investment hit a new high last month, raising worries that Beijing’s intensifying crackdown on local government debt, which mainly finances infrastructure, will drag down overall growth, according to the Financial Times. Fixed-asset investment remains the biggest engine of China’s economy and also fuels global demand for commodities such as coal, steel and base metals. Fixed investment contributed 45% to China’s GDP last year, by far the highest share of any major economy. The US share is 22%, while Japan’s is 30%. The infrastructure share of overall fixed-asset investment hit 21.4 % in the year to July, the highest on record, according to FT calculations of official data. That compares with 17.7% for real estate. “There are so many different ways that local governments finance urban infrastructure. But now there’s a real concern about how they can continue,” said Shen Jianguang, China economist at Mizuho Securities.
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