China approved plans to build 2,018 kilometers (1,254 miles) ofroads, spurring the biggest stock-market rally in almost eightmonths on signs the government is stepping up stimulus efforts torevive economic growth.

The government also backed nine sewage-treatment plants, fiveport and warehouse projects, and two waterway upgrades, accordingto statements on the website of the National Development and ReformCommission yesterday. No investment amounts were given.

The Shanghai Composite Index closed 3.7 percent higher, led byconstruction stocks, on speculation infrastructure spending willhelp bolster growth that's cooled to the slowest pace in threeyears. The announcements came a day after approvals for subwayprojects in 18 cities, an earlier rise in the railway buildingbudget and increases in land supplies in cities includingGuangzhou, Hangzhou, Beijing and Shanghai.

“They are clearly stepping up the infrastructure-investment pushto help boost confidence and revive growth,” said Zhang Zhiwei,Hong Kong-based chief China economist at Nomura Holdings Inc.Premier Wen Jiabao's policy stance is shifting “to a more proactiveand significant easing.”

The government may boost infrastructure-spending growth to anannual pace of more than 20 percent in the coming months from 15percent to stimulate the economy, HSBC Holdings Plc economists QuHongbin and Sun Junwei said in a note yesterday.

Growth in gross domestic product may rebound next quarter as theinvestments filter through, Nomura's Zhang said. The timing of theannouncements also shows that the government wants to boostconfidence as the projects had been accepted previously, he said.The new road projects, which include highways in Zhejiang andXinjiang provinces, were approved as early as June.

“China's central government finally took real actions to arrestthe worsening slowdown,” Bank of America Corp. economist Lu Tingsaid in a note. “Adding home supply and improving urbaninfrastructure are the two best ways to contain home prices, speedup urbanization and increase social welfare.”

Anhui Conch Cement Co., the nation's biggest cement-maker bymarket value, rose by the 10 percent limit in Shanghai, the mostsince July 2010, to close at 15.07 yuan. Sany Heavy Industry Co.,China's biggest construction-equipment maker, also jumped 10percent. Second-ranked Zoomlion Heavy Industry Science &Technology Co. rose by the same amount in Shenzhen.

Lonking Holdings Ltd., which makes wheel loaders and roadrollers, surged 20 percent in Hong Kong, the most in almost fouryears, to close at HK$1.21. Builder China CommunicationsConstruction Co. rose 6.1 percent.

Shanghai Disney

The approvals on Sept. 5 for a total of 25 new subway andinter-city rail projects are worth more than 800 billion yuan ($126billion), or 1.7 percent of 2011 gross domestic product, accordingto HSBC. The spending will run from the second half of the year to2018, it said.

Among the approvals, Shanghai got the go-ahead for an expansionof previously approved metro-line projects. About 16.8 billion yuanof new spending, including a 4.4 billion-yuan line extension to theplanned Disney theme park, was added to an existing plan.

The NDRC backing may accelerate metro-rail developments, most ofwhich were already in local governments' plans, Citigroup Inc.analysts Jenny Zhen and Paul Gong said in a note to clientsyesterday.

“This sentiment is positive for the whole railway constructionand equipment sector,” they said.

Rail stocks rose for a second day after the subway approvals.CSR Corp Ltd., China's biggest trainmaker by market value, rose 3.7percent in Hong Kong after surging 8.8 percent yesterday. ChinaRailway Construction Corp. gained 4.2 percent and China RailwayGroup Ltd. climbed 1.6 percent. The benchmark Hang Seng Indexjumped 3.1 percent.

Reinforcing steel-bar futures gained 4.1 percent in Shanghai toclose at 3,406 yuan a metric ton.

The Chinese government also recently boosted plans for 2012spending on railway construction to 496 billion yuan, according toChina Railway Group. It is at least the third increase since thestart of July when Premier Wen Jiabao said promoting investmentgrowth is key to stabilizing economic expansion.

China's economy, the world's second-biggest, expanded 7.6percent in the second quarter from a year earlier, the slowest pacein three years. Manufacturing slowed in August, according tosurveys of purchasing managers, with one gauge at the lowest levelsince March 2009.

Premier Wen has pledged policy “fine-tuning” to cope with adeepening slowdown as export gains slumped to an annual 1 percentpace in July from 11 percent in June. The trade deteriorationescalated the risk that Wen will miss his full-year economicexpansion target for the first time since he took office in2003.

The construction push “seems to reflect that the economic datain the second half won't be great,” said Vivian Liu, aShanghai-based analyst with Sinopac Securities Asia Ltd. “Thegovernment has to rely on increased fixed asset investment to helpeconomic growth.”

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