NEW YORK China is set to push ahead with a vast infrastructure program that will boost economic growth as the countrys leadership change takes place, according to Klaus Kleinfeld, chairman and chief executive officer of Pittsburgh-based aluminum producer Alcoa Inc.
"The next injection will be infrastructure-driven, and the good news is that those projects are shovel-ready as the government stopped some of them when it was worried the economy would overheat," Kleinfeld said. "The reason they didnt go for an infrastructure program earlier is that they were worried about inflation rates in China, which basically means consumer pricesincluding foodwhich tends to lead to unrest."
Thursday was the start of a once-in-a-decade leadership change in China as the 18th National Party Congress got underway in Beijing. The actual government change is not slated to take effect until March, but the new leaders will emerge in the week ahead.
Many metal market investors are hoping the new regime will resume stimulus plans that have fallen away in recent months, slowing the countrys exponential growth.
"I had a chance to spend a week in China a couple of weeks ago and pretty much saw the top existing leaders and some of those that most likely will be in the top new guard, and talked with them about their views on what theyre doing to the economy now," Kleinfeld said. "Im optimistic that youll see the impact of the change and the new program already shining through at the end of the year in their numbers, so I think China is going to continue to be a very positive growth story."
Kleinfeld said he expects the transition to go "relatively smoothly" and that Chinas leaders are clear on what they need to do to keep its natural resources sector running efficiently, including reining in overcapacity and preventing the waste of resources that are in short supply, including energy.
"I believe once the new people are in their seats the ripple-through effect on the whole system is probably going to be over by the end of the year, and youll see these things unfolding," he said.