China Railway
Projects expected to boost the sluggish economy. Reuters

China has announced infrastructure projects worth one trillion yuan (£98.7b) sparking speculations of an economic revival in the world's second largest economy.

The country's economic body, the National Development and Reform Commission, plans to develop highways, ports and runways signalling the authorities' intention to boost the economy before its upcoming change in leadership, reports Reuters.

"Apart from the large sizes of the projects, the announcements for these new projects were all made in two days, which is very intense," Zhang Zhiwei, an economist at Nomura in Hong Kong, told Reuters.

Shares of machinery firms jumped on the news, with Sany Heavy Industry listed in Shanghai and Zoomlion listed in Shenzhen gaining more than 6 percent, while Taiyuan Heavy rose 10 percent

The project is backed by Beijing which raises its chances of execution, as many projects announced in the recent past by local governments failed to see the light of day due to shortage of funds.

Analysts had been of the opinion that the Chinese government would come up with more fiscal spending and monetary easing to revive the economy, but significant action was limited with the authorities opting for a cautious approach, reported the Financial Times.

China's second quarter growth had fallen to its lowest in three years at 7.6 percent and soon to be released data for the month of August was expected to be bleak as well.

Bloomberg reports that lack of action from the government had pulled the Shanghai Composite Index down for the fourth month by 2.7 percent in August.

Hong Kong-based analyst at Bank Julius Baer & Co Alan Lam said in an email to Bloomberg that the latest announcement suggests that "Chinese policy makers may consider implementing more fiscal measures to support economic growth".

"The market may be a bit over-worried on the near-term economic outlook and policy uncertainties in China. But the negative market perception on Chinese equities is unlikely to change before policy makers take steps to boost the economy and China's economic data start to improve," he said.

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