The number of newly started projects falls 17.8 per cent as growth rates weaken Fixed assets investment, a main economic indicator of government-driven investment in infrastructure projects and in manufacturing, slowed considerably last month. This is the latest sign that the efforts to rein in credit expansion that began in the summer are paying off. Figures from the State Statistical Bureau show fixed assets investment grew 22.6 per cent to 395 billion yuan (HK$371 billion) in October but the growth rate, which is 3.9 percentage points lower than September's, is the slowest in recent months, the bureau said. A more startling decline in growth came in the number of newly started projects which fell 17.8 per cent to 9,056 last month compared to the previous month. For the first 10 months of the year, investors poured 3 trillion yuan into fixed asset investments, up 30.2 per cent year on year, but the growth rate was 1.2 percentage points lower than in the first nine months. Of the 3 trillion yuan, 1.6 trillion went into infrastructure, up 28.6 per cent year on year, while 591 billion yuan went into industrial upgrading, up 34.1 per cent. A total of 737 billion yuan went into the development of new property, up 31.3 per cent. However, all three sectors saw slower growth when compared to the first nine months. Infrastructure spending growth fell by 0.5 percentage points, renovations spending growth fell by 3.1 percentage points, and new property development growth fell 1.5 percentage points. The declines were expected as the government has been slamming the brakes on bank lending, especially to dubious property projects and local government development zones. Economists have been waiting for growth to decline, and some were even worried that government efforts were failing to slow down what potentially could be a bubble. 'China's loan growth has decelerated by more than half since the government announced credit tightening in August,' said Andy Xie, chief economist of Morgan Stanley Asia, in a recent report. 'We expect further deceleration in the next three months.' However, Mr Xie said he believed there is a significant lag between the government credit squeeze and the real slowdown, which may not come for a few more months. 'The lag could be one or two quarters, depending on how much money borrowers have not spent,' he said. The government is doing the right thing in cracking down on excess liquidity, said Citigroup economists Don Hanna and Huang Yiping in a recent report. 'Overinvestment, while expanding supply, is doing so in a manner that risks the future health of the economy,' the Citigroup economists said. 'This is simply because things the market values cheaply are often wasted.'