No cheers for China's massive infrastructure spending: Barclays

New CNY10trn infrastructure pipeline filled with medium- to long-term, plan-less projects.

"On the surface, it may look like China has rolled out a new ‘stimulus package’ of more than CNY10trn – local governments have announced massive investment programs, while the NDRC has approved more infrastructure projects," said Baclays in its latest research on Chinese government policies and their implications on the China economy.

"But most of the proposed projects are scheduled for the next three to eight years and, more importantly, few will have any detailed funding plans. In fact, the PBoC, CBRC and MoF have all been easing policies reluctantly," it noted.

The comment came as Barclays noted how market participants became giddy at the announcement of investment projects for China. 

"The current downturn is a combination of structural and cyclical changes. Contrary to the experiences during the Asian and global financial crises, this time China’s economy is still creating jobs and inflation has already picked up," Barclays said.

"Activity indicators, output gap measures and inventory data, however, all confirm that the economy is still moving downward, with recent export weakness exerting the biggest drag," it added.

"Exports are the main risk to Chinese growth, although recent actions by the Fed and ECB should have helped to contain the downside risks. The eight support measures announced by the State Council will likely have a limited impact," it said.

"We think a stabilisation of growth in China hinges on a turnaround in investment, which probably has to be driven by infrastructure projects funded by the central government, especially in railway, and property sectors," it said further.