China's fixed asset investments slows marginally

Growth in China's fixed asset investments eased marginally in the first seven months of 2006, official data shows, offering further evidence that the economy may be starting to cool.

Urban fixed assets, a measure of investment in China's major infrastructure projects, totaled 4.47 trillion yuan (US$560 billion), up 30.5 percent from thesame period a year ago, the National Bureau of Statistics said. China's urbanfixed asset investments rose 31.3 percent in the first six months of the year,according to previously released figures.The level remains well above the official target of 18 percent growth for the year, although Qu Hongbin, an economist at HSBC in Hong Kong, said the very slight slowdown was positive. "It's a good thing," said Qu. "It means the tightening measures that have been introduced since March are starting to have an impact.

"But it is still far too early for the authorities to claim victory in its fight against overheating." China's economy expanded by 10.9 percent in the first six months of the year and 11.3 percent in the second quarter, driven by heavy investment especially in the provinces. The central bank has implemented a range of macro measures to try and slow economic growth, such as an interest rate hike in April and curbs on investment in key industries.

Other figures released this month have also pointed to a very mild deceleration in the economy, with year-on-year growth in industrial output for July slowing to 16.7 percent from 19.5 percent in June. Inflation slowed to 1.0 percent in July from 1.5 percent a month earlier. The nation's trade surplus soared over 40 percent from a year ago to 14.61 billion dollars in July to hit another record high although export growth of 22.6 percent was slightly lower than 23.3 percent recorded 12 months earlier.

However Anantha Nageswaran, an economist at Julius Baer investment bank in Singapore, was highly skeptical that the recent data could be relied upon to gauge the temperature of the Chinese economy. "The Chinese government announces a few tightening measures and, voila, we have slower industrial production and investment spending growth," Nageswaran told clients in a note. The true state of China's growth trajectory is a matter of belief (rather)than reliance on reported statistics." The fixed asset numbers released on Wednesday also appeared to reinforce government concerns that provincial authorities are not enacting measures to slow the economy as swiftly as Beijingwould like. The central government has repeatedly told the provinces to cool it but the country's key economic planner said last week the economies of three quarters of China's provinces expanded at 12 percent or more in the first six months.

Projects funded by provincial and local governments in the first seven months increased 31.1 percent to four trillion yuan, the statistics bureau said.



Submit Comment

Required

Resident Blawgers