Fixed-asset investment soars 20.4 per cent
( 2001-08-17 10:17 ) (7 )

China reported a 20.4 per cent surge in fixed-asset investment in July as Beijing ramps up spending to support economic growth during a global slowdown.

Analysts said the financial push was desperately needed this year but the government could not keep up the spending binge forever and must try to foster more private investment.

"Though government investment is strong now, a healthy economy needs a pick-up in private investment which still remains weak," said Dai Yuanchen, an economist at the Chinese Academy of Social Sciences.

Private investors are still excluded from a number of industries in China, such as car manufacturing, civil aviation and power generation.

Earlier this year, Premier Zhu Rongji said industrial sectors that had been opened to foreign investors should also be opened to domestic private investments.

However, no substantial steps have been taken so far.

Fixed-asset investment by state units, including state-owned companies, jumped 18.4 per cent year on year to 1.11 trillion yuan (US$133.7 billion) in the first seven months of this year, the State Statistical Bureau said in a statement.

It gave no figure for July alone, but previously released data implied fixed-asset investment was 218.3 billion yuan.

China has settled on state spending and domestic consumption as the main engines to achieve gross domestic product growth of 7 per cent to 8 per cent this year as export growth slows sharply.

China's export growth was a mere 4.6 per cent in the second quarter, versus 14.6 per cent in the first quarter and 27.8 per cent last year.

Salomon Smith Barney China economist Huang Yiping predicts that China's export growth will remain between zero and 5 per cent in the third quarter, according to a research report released on Wednesday.

Slowing export growth in China was a serious concern for policy-makers in Beijing, he said.

With the strength of the recovery in domestic consumption uncertain, Beijing has pumped up spending to take up the slack.

"If fixed-asset investment growth can maintain the current trend for the remaining months, we will see favourable GDP growth despite weak exports," Mr Dai said.

Spending on infrastructure took the lion's share of fixed-asset investment in the first seven months, rising 11.1 per cent year on year to 582.4 billion yuan, the bureau said. However, growth in spending on property and technical upgrades by state companies was stronger.

Investment in property surged 31.6 per cent to 265.2 billion yuan while spending on technical upgrades jumped 26.4 per cent to 219 billion yuan in the January-July period, the bureau said.

Housing reform, release of more land and China's entry to the World Trade Organisation buttressed property spending, it said. China is expected to join the WTO by early next year.

Growth in fixed-asset investment in western China was stronger than central and eastern provinces as the government has made developing the lagging western regions a priority, setting huge spending on infrastructure.

Fixed-asset investment in western areas soared 26.8 per cent year on year to 185.7 billion yuan in the first seven months, the bureau said. China is considering an increase in the issue of special state bonds this year beyond the 150 billion yuan allotted in March to help economic growth.

Finance Minister Xiang Huaicheng had been quoted in the state media as saying that 600 billion yuan was needed before the end of next year to complete ongoing infrastructure projects.

"The government may be thinking of something to make sure investment growth can be maintained because the economy is still to some extent dependent on government investment," said Liao Qun, senior economist at Standard Chartered Bank in Hong Kong.