Fixed asset investment stimulates growth
By Su Bei (China Daily)
Updated: 2005-09-16 08:53

China's urban fixed asset investment rose 27.4 per cent year-on-year during the first eight months of this year, the National Bureau of Statistics said yesterday.

Fixed asset investment, which covers spending on things such as roads, power plants and houses, stood at 4.12 trillion yuan (US$507.4 billion) during the January-August period.

In August, urban fixed asset investment rose 28.5 per cent compared with a year ago, the bureau said.

Zhu Baoliang, chief economist with the State Information Centre, said August's investment growth was stable, although it was up slightly from the 27.7 per cent rate recorded in July.

The higher investment growth in August bears close relation to the month's credit situation, which was in loosening mode.

The People's Bank of China, the central bank, said earlier this week that the broad money supply, or M2, rose 17.3 per cent year-on-year in August. The growth rate was 1 percentage point higher than a month earlier.

Outstanding renminbi loans rose 13.4 per cent year-on-year to 18.8 trillion yuan (US$2.3 trillion) in August. The growth rate was also 0.3 of a percentage point higher than a month earlier.

"The investment growth will slow for the rest of this year, due to the government's macro-control measures, including strict land control and tight credit, to rein in investment," Zhu said.

Investment in property sector has in fact been cooling gradually as curbs take effect, but spending on bottleneck sectors such as energy and transportation has been speeding up thanks to government support, figures from the National Bureau of Statistics indicate.

Investment in real estate sector rose 22.3 per cent year-on-year during the first eight months, declining from 23.5 per cent in the first seven months.

But investment in coal mining and processing was up 81.9 per cent during the eight months, and investment in railways rose 39.2 per cent.

Zhu said the investment growth would not, however, decline too much in the coming months, as the scale of projects under construction was still very large.

Local governments also harbour strong enthusiasm to increase investment, he said. "Investment growth will continue to remain around the 27 to 28 per cent mark," he said.

Wang Zhao, a senior researcher with the State Council Development Research Centre, said August's investment growth was a "proper" rate to fuel the country's economic growth.

"An investment growth of 20 to 30 per cent is required, because the government will have to keep a relatively fast economic growth rate to solve pressing problems such as unemployment and disparities among different regions," he said.

Fixed asset investment has been essential for the country's economy, because it has contributed more than 50 per cent to the gross domestic product. It rose 25.4 per cent year-on-year during the first half of this year, while the economy rose 9.5 per cent.

Close