More steel, more cement

China has just slotted in another element in the on-going infrastructure investment programme. This underpins our view of continuing high growth (see Larry Brainard’s report of 3 Feb) which will maintain demand for hard commodities to fuel production of steel and construction materials.

After the big urban transport schemes we analysed in Dian Qu’s note last month, it is now the turn of airports which will get a big boost from the Rmb1.5 trillion (US$230 billion) investment programme announced by the Civil Aviation Administration of China (CAAC).

In all, 45 new airports will be built in the next five years, a faster pace of expansion than the 33 opened over the last five years. The decision comes despite an admission by Li Jiaxiang, head of the CAAC, that 130 of the country’s 175 airports suffered losses last year. The total loss of Rmb1.68 billion (US$24 million) is, however, regarded by the authorities as acceptable given the role of air travel in opening up transport routes, attracting foreign companies and boosting tourism to remote areas.

CAAC also announced a plan for a big increase in aircraft purchases by Chinese airlines to keep pace with growing demand as shown in the chart below. While that will mean orders for Boeing, Airbus and other foreign suppliers, the longer-term plan to build a 220-seat Chinese airliner in 2015 (see our report) marks an important move in import substitution embodied in the new Five Year Plan.

Number of aircraft

Million passenger trips

Number of commercial airports