Fixed asset investment grows 31.1%


Updated Mon, 23 Aug 2004 00:00:00 GMT

China's fixed asset investment grew 31.1 per cent during the first seven months of the year compared with the same period a year ago, the National Bureau of Statistics said.


The bureau, which did not give figures for July, said the country's fixed asset investment stood at 2,711.6 billion yuan (US$326.7 billion) from January to July.


Sachs (Asia), July's growth rate would be about 31.5 per cent.

"China's fixed asset investment showed a stark and stronger improvement in July than we expected," said Liang Hong, its China economist.

The statistics bureau said sectors that continued to show strong growth were electrical machinery, transport, chemicals and utilities.

In addition, investment in construction and investment from foreign direct investment also picked up.


Zhu Jianfang, an economist at China Securities, said improvement in fixed asset investment bore close relation to the government's recent policy changes.


"While continuing to curb investment in red-hot sectors such as cement and steel, the government increased investment in bottleneck sectors such as energy and transportation," he said.


Zhang Liqun, a senior researcher with the State Council Development Research Centre, said July's figures were encouraging.


    "If fixed asset investment increases at about 30 per cent this year, the country's economy will grow faster than last year," he said.

But figures in July alone did not indicate whether fixed asset investment had become stable, he said. "We need to observe the figures for the next few months."


"I'm still worrying the fixed asset investment growth might decline too much, because this would have a big impact on the economic growth," he said.


The government wants to bring economic growth down from current levels where many resources such as oil have been constrained, but needs it to stay above 7 per cent to generate enough jobs.


China's fixed asset investment has grown rapidly since the second half of last year. It rose to 53 per cent during the first two months.

The government worries that excessive growth in some sectors and areas could have a serious impact on the economy.


As a result, the government has taken a raft of measures to try to cool the economy. The measures include raising bank reserve requirements three times, curbing unwanted fixed asset investment projects and issuing tighter restrictions on new projects in "overinvested" industries such as property and steel.


The macro-control measures have achieved initial results, says economist Zhang Xueying of the State Information Centre.

Fixed asset investment slowed to 34.7 per cent in April and 18.3 per cent in May.


Other major economic indicators also suggest the macro-control measures are working.

The country's industrial output increased 15.5 per cent in July compared with the same month last year.


The growth rate was 0.7 percentage points lower than the previous month.

 Broad money supply or the M2 rose a year-on-year 15.3 per cent in July, according to the central People's Bank of China. The growth rate was 5.4 percentage points lower than a year earlier, and 0.9 percentage points down from the previous month.


Economists began to worry about the possibility of an abrupt economic slowdown.


"The government should not take further measures - including a rate hike - to cool the economy," Zhang said.


China's economy grew a year-on-year 9.6 per cent during the second quarter of this year. It rose 9.8 per cent during the first quarter. For the first six months, the country's gross domestic product grew year-on-year at 9.7 per cent to around 5.9 trillion yuan (US$708.1 billion).