Data ease fears over pace of growth in China
By James Kynge in Beijing
Published: November 19 2003 4:00 | Last Updated: November 19 2003 4:00
Concerns over the torrid pace of Chinese investment in infrastructure, property and new factories eased yesterday as Beijing announced a slowdown in the growth of fixed asset investment in October for the fourth straight month.
The deployment of fixed assets in October grew 22.6 per cent from the same month a year earlier, signalling that measures Beijing has taken to rein in a surge in bank credit and limit production overcapacity has borne fruit.
Sooner or later, economists said, this slowdown might hit the voracious Chinese demand for imported metals, which has been setting international prices for months. Most of the imported steel, copper, aluminium and zinc was going to fuel the investment boom.
But, on the basis of four months of figures, that boom is now easing. The October growth in fixed assets compares with a 26.5 per cent expansion in September, a 30.7 per cent rise in August, a 32.3 per cent increase in July and a 35.3 per cent surge in June.
One of the reasons was that bank credit, the main source of finance for such projects, was becoming harder to obtain, Chinese bankers said. The People's Bank of China, the central bank, has been sucking liquidity out of the banking system for several months in an attempt to restrain banks from non-viable projects.
Evidence of some success in this policy could intensify a debate within Chinese policy circles as to whether the wider economy was suffering from an overheated investment phase, or embarking on a robust new growth dynamic.
Although the official figures show gross domestic product expanded at 8.5 per cent in the first nine months, several independent economists said the real rate of growth - as judged by several proxy indicators such as electricity production - was likely to be around 11 or 12 per cent.
Beijing has said that several industrial sectors, including steel, cement, aluminium and property, are overheated. But some officials and economists are now disputing this, especially given the moderation in fixed asset investment and signs that demand for retail products is rising.
Retail sales recorded their highest monthly increase in two years in October, growing 10.2 per cent.
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