Investment in China's factories, real estate and other fixed assets likely
grew at a slower pace in July as the government moved to curb expansion.
Fixed-asset investment in towns and cities climbed 30.7 percent in the first
seven months from a year earlier, according to the median forecast in a
Bloomberg News survey of 20 economists. The gain follows a 31.3 percent increase
in the first half. The figures are due at 10 a.m. local time tomorrow.
Premier Wen Jiabao is stepping up efforts to curb spending on factories and
real estate to prevent the world's fastest-growing major economy from
overheating. Money supply expansion has cooled since May and new lending dropped
last month after banks were forced to set aside more money as reserves.
"Investment growth likely eased marginally in July in line with the
moderation of money supply and bank loan growth as well as policies such as
those targeted at the property market," said Qian Wang, an economist at JPMorgan
Chase & Co. in Hong Kong.
Money supply grew 18.4 percent in the year to July after accelerating to 19.1
percent in May, the fastest pace since December 2003. New yuan lending in July
totaled 171.8 billion yuan, half the monthly average in the first six months of
the year.
In its second-quarter policy report last week, the People's Bank of China
said it would use a mix of monetary tools to reduce the amount of cash in the
financial system available for investment funding. The central bank raised
lending rates in April and has since twice increased the reserve requirement
ratio for commercial banks.
Inflation Concerns
China's economy grew 11.3 percent in the second quarter from a year earlier,
the fastest expansion in a decade, raising concerns that booming investment may
stoke inflation. The last time China expanded that fast, in 1994, inflation was
running at more than 20 percent.
The central bank last week said economic growth will slow "slightly" in the
second half and warned that inflationary pressure is rising as surging
investment boosts prices of raw materials and energy.
Inflation as measured by the consumer price index unexpectedly fell to 1
percent in July as vegetable prices dropped. Excluding food, inflation was 1.2
percent, matching June's pace which was the fastest since November.
"The government is worried about the impact of investment on inflation," said
Hong Liang, an economist at Goldman Sachs Group Inc. in Hong Kong. "It will be
inflationary, and when you have inflation you have to tighten."
Government Commands
The National Development and Reform Commission, the nation's top economic
planning body, on Aug. 1 said it ordered provincial authorities to review new
investment projects and cancel those that don't meet the government's
industrial, land, credit and environmental regulations.
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