Soft landing seen for China's economy
(Reuters)
Updated: 2005-08-03 06:24

A Commerce Ministry survey painted the picture of an economy in which completed investments are rapidly coming on stream just as demand weakens marginally.

Looking at 300 kinds of production materials, such as coal, steel and cement, the survey found that only 7 percent of them would have higher demand than supply in the second half of the year, the China Securities Journal cited the survey as saying.

The proportion in the first half of the year was 23 percent.

Power switch

Economists said the sharp slowdown in China's oil import growth was partly explained by the growing availability of coal, fewer shipping bottlenecks and weakening energy demand in general.

The Commerce Ministry's survey showed China was likely to have a crude oil shortfall this year of 2.6 million barrels per day. That implied a 6 percent increase in crude imports this year, well down from last year's 35 percent surge.

Xie said China's need to import petroleum products to produce electricity was vanishing as its generating capacity -- 83 percent based on coal and 15 percent on hydro -- caught up with demand, reducing the need for factories to run diesel generators.

Indeed, capacity under construction was so vast that China could find itself with a power-generating surplus as early as next year. "We believe China's overall imports of crude and petroleum products will decline in both 2005 and 2006," he said.

Because inputs are increasingly plentiful, the Commerce Ministry's survey expects annual price inflation for production materials will slow sharply to just 4 percent for the whole year from a rate of 13.6 percent in the first half.

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