This time, there will be no new subway lines in Harbin, a major city in northeast China. At the other end of the country, phase 3 of the subway system in Kunming, the capital of Yunnan, has also not been approved by the central authorities, according to the business news website Yicai. Meanwhile, in Baotou, in the Inner Mongolia region, construction of the subway there has been put on hold. As growth slows, China is looking for a new model. While it has not given up on infrastructure spending, which is by far the highest on the planet in recent decades and the driving force behind its economic development, it seeks to rationalize it.

The country's leaders are worried about local government debt, which suffers from opaqueness because it is often underwritten via debt platforms external to public accounts. The construction of roads, bridges and high-speed rail lines contributed significantly to four decades of strong growth, but finding relevant projects and financing them has become difficult.

As for real estate, which previously accounted for 20% of China's economic activity, it has entered its third year of crisis. According to the International Monetary Fund, the number of new construction projects has fallen by 60% compared with before the Covid-19 pandemic. In 2023, prices for existing homes fell by 6.3% year-on-year in major cities. Compounding this gloom is youth unemployment, which reached 21% in the summer of 2023 before falling to 14.9 % in January after a new calculation method was implemented. And while prices rose for the first time in six months in February, by 0.7% year-on-year, in a period of spending linked to the Lunar New Year, the deflationary risk remains.

Despite these headwinds, an ambitious growth target of around 5%, similar to 2023, was set at China's major annual political meeting, the week-long session of the National People's Congress, which ended on March 11. To achieve this, the Chinese Communist Party wants to stabilize the economy's old driving forces, chief among them real estate. The government urged cities to create "white lists" of real estate projects that banks – most of them state-owned – have been invited to finance. Chinese President Xi Jinping himself went to Shanghai in late November 2023, where his visit to a state-subsidized housing project marked the launch of a campaign of state support for low-rent housing.

At the same time, the all-powerful leader is championing a new mantra: "new productive forces," a neo-Marxist term meaning support for the cutting-edge sectors in which China has achieved breakthroughs. "The term shows the extent to which the government believes that the digital, high-tech and energy-transition economies can accelerate growth," noted Wang Huiyao, the founder of the Center for China and Globalization, a Beijing-based think tank.

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