Fixed-asset investment grows 26.8pc on state-led spending

PUBLISHED : Wednesday, 17 December, 2008, 12:00am
UPDATED : Wednesday, 17 December, 2008, 12:00am

Data raises hopes stimulus package will stabilise economy

Fixed-asset investment growth on the mainland last month beat expectations, thanks to a pick-up in Beijing's spending, raising hopes that its stimulus plans would stabilise the economy next year.

Urban fixed-asset investment was up 26.8 per cent year on year at 12.76 trillion yuan (HK$14.45 trillion) in the first 11 months of this year, the National Bureau of Statistics said yesterday.

The growth rate was 0.4 percentage point slower than the pace over the first 10 months of the year but better than in the comparable period in the previous two years and slightly above market expectations.

The good news on the investment front contrasted with poor data on several other fronts this week, which pointed to an accelerated decline in the world's fourth-largest economy.

Data for last month released this week showed a fall in exports for the first time in seven years, a decline in fiscal revenues, record-low growth in factory output and a decline in wholesale and consumer inflation rates that raised the spectre of possible deflation. But the year-to-date rise in urban fixed-asset investment compared with growth rates of 25.8 per cent for all of last year and 24.5 per cent in 2006.

Investments in fixed assets have been the main driver of the mainland's double-digit growth in recent years, accounting for about 40 per cent of gross domestic product growth.

'Following the stream of bad news from other data items in the past week, urban fixed-asset investment data offers some comfort that government-driven investment will serve to support growth,' said US investment bank Morgan Stanley.

Completed investment by state-owned enterprises hit 5.34 trillion yuan, up 21.6 per cent year on year, the said in a statement posted on its website.Investments by the central government, which account for about 10 per cent of urban investment, rose 31.8 per cent in January-November from a year earlier, accelerating from the 28.7 per cent growth in January-October.

Qu Hongbin, the chief China economist with HSBC Holdings, said in a note the growth last month slowed modestly to 23.8 per cent yearonyear from 24.4 per cent in October in nominal terms.

'However, deflated by , the real growth of November edged up to 21.8 per cent year on year from 17.8 per cent in October, thanks to the government-sponsored investment partly offsetting the slowing private investment,' Mr Qu said.

The government last month announced a trillion yuan stimulus package, most of which will be spent on infrastructure projects such as railways and roads to boost growth amid the global downturn.

Sherman Chan, a regional economist with Moody's Economy.com, said the small slowdown in fixed-asset investments was in line with expectations, but that an overall slowdown 'seems inevitable' in the six months ahead.

The main source of support for investment growth, Ms Chan noted, was infrastructure development, funded by both central and local governments. But as construction projects were unlikely to start until after the first quarter next year and would not reach full speed until 2010, a short-term slowdown in investment was likely.

Investment in real estate development totaled 2.65 trillion yuan, up 22.7 per cent, the data showed. The growth rate was 1.9 percentage points lower than in the first 10 months.