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Mark O'Neill

Prices of grain, pork and main industrial raw materials fell in the first half of the year, while output of crude oil and electricity also slumped, further evidence of the serious slowdown in the mainland economy.

 Power output was 530 billion kilowatt-hours, down from 533.9 billion kwh in the same period last year, and production of crude oil was 78 million tonnes, down from 80.82 million tonnes, the People's Daily reported yesterday.

 Prices of grain plunged 11.2 per cent, pork 12 per cent while sugar and fresh vegetable prices also fell, the Financial News said.

 This means a bad year for the nation's farmers whose average income in the first six months was 977 yuan (about HK$909.29), unchanged from a year ago.

 The price falls reflect a surplus of production, with the two highest grain harvests on record in the past two years, and high stock levels.

 Rice prices have started to rebound due to devastating floods in the south and central regions, which helped cut the summer grain crop by 11 per cent to 113.1 million tonnes and will mean a cut in this year's grain harvest.

 The market for industrial goods was weak, with output of the 19 leading industrial products, including coal, steel, timber, cement and copper, totalling 876.3 billion yuan, up 0.62 per cent on the same period last year.

 Sales hit 858.5 billion yuan, up 0.16 per cent, with prices falling 3.3 per cent.

 The official press yesterday gave new details of the deepening impact of the Asian crisis, which led to actual foreign investment falling 1.3 per cent in the first half to US$25 billion, the first drop in nearly 20 years.

 Contracted investment from the 10 main countries and regions in Asia in the period was $13.54 billion and actual investment $14.19 billion, falls of 11.7 per cent and 11.3 per cent respectively over the same period last year, the Economic Information Daily said.

 The 10 are Hong Kong, Macau, Taiwan, Japan, Philippines, Thailand, Malaysia, Singapore, Indonesia and South Korea.

 The biggest falls in contracted investment were from the Philippines, down 51.77 per cent, Singapore down 42.13 per cent and South Korea down 35.04 per cent.

 Such investment from Hong Kong fell 3.1 per cent and from Taiwan 8.41 per cent.

 Mainland provinces and cities felt the effect of this fall, especially Shandong, which in the first five months attracted contracted foreign investment of $523 million, down 66.18 per cent, and actual investment of $443 million, down 54.21 per cent.

 This is because more than half the investment in the province comes from Japan and Korea.

 In Weihai city, for example, more than 60 Korean-invested firms have shut down completely or partially, while talks on 13 Korean projects in Yantai have stopped and postponed on 20 others.

 These include a Hanbo Steel scheme to build ships and plans by Samsung to increase its investment.

 The report said the message from the crisis was that the mainland must reduce its dependence on investment from Asia, which accounted for 80 per cent until the end of last year, and attract more money from Europe and North America.



Price, output falls highlight slowdown as foreign funding declines