HONG KONG: Infrastructure investment in China is likely to continue growing in the next five years, so as to keep pace with the country's ongoing development in transportation systems, logistic networks and the power industry, according to JP Morgan's managing director and chairman of China Equities and Commodities Jing Ulrich, who was speaking at the Asian Financial Forum in Hong Kong yesterday.

Ulrich said 80 percent of the country's 4-trillion-yuan economic stimulus package has been allocated to infrastructure projects, while infrastructure improvement has also been a key element for the country's economic success.

"China's remarkable turnaround in 2009 was largely attributable to the country's decision to bring forward infrastructure initiatives and to foster conditions that allow major projects to proceed with adequate funding," Ulrich said in a panel discussion on infrastructure-related issues in the second day of the financial forum.

Among the 4-trillion-yuan stimulus package, 45 percent has been designated to railways, highways, airports and ports construction, while 25 percent and 9 percent has been distributed to post-disaster reconstruction in Sichuan and rural infrastructure, respectively.

The central government initiated a massive economic stimulus package in late 2008, together with a series of industry-friendly policies and loose monetary policy, to boost the country's economy amid the global financial crisis.

The economic stimulus package seems to be bearing fruit, as the government announced the country's fourth quarter GDP growth improved to 10.7 percent in the fourth quarter of 2009. For the entire year of 2009, the economy expanded 8.7 percent, surpassing the official growth target of 8 percent.

Commenting on the country's railway section, the investment banker said the country's total investment in railways may amount to 3.5 trillion yuan between 2015 and 2020, as the country expects to extend the current 86,000 km railway network to 120,000 km by 2020. "We expect the 120,000 km target may be fast-tracked to 2015," Ulrich said.

Ulrich also expects the power industry on the mainland to continue to grow in the coming years, while the construction of the high-speed rail system will also help to facilitate the transportation of coal, accounting for 68 percent of the country's power generation, from central-northern coal mines to the fast-growing regions in the southern and coastal regions.

As the scope of foreign and private sector participation in the mainland's infrastructure investment improves, Ulrich believes infrastructure will serve as "a catalyst" to help China develop a more sophisticated financial market and instruments, as well as to attract more foreign investment.

The third Asian Financial Forum, which ended yesterday, addressed topics including financial innovation and regulation, the financial markets integration in Greater China and the role of banking in the new economic order, as well as global economic development and its implications for Asia.

(HK Edition 01/22/2010 page3)