To fight the devastating consequences of the global financial crisis, China’s government, as well as many other countries, is mobilizing major relief, increasing capital availability and creating unprecedented liquidity in order to stave off a global financial meltdown. As China moves into the third quarter of 2009, the economic downturn is clearly under control, but the increased liquidity has created an overabundance of capital that could potentially breed inflation, an abnormal surge of stock market values and real estate prices. However, dealing with the problem of excess liquidity is less hazardous than to have to deal with a financial meltdown. In this market context, we review the China infrastructure sector.

Infrastructure investment is a key driver of the domestic market. As part of its stimulus package, China announced an ambitious $580 billion two-year spending plan in early November 2008. This grabbed headlines globally at the time, but what came as a result of