China's Growth Likely to Keep Steady
By TERENCE POON
August 15, 2008 6:50 a.m.
BEIJING -- A pickup in China's investment growth in July, supported by rebuilding in regions struck by natural disasters this year, is likely to help offset the effect of weakening external demand and keep economic growth steady, one of the policy tasks Beijing recently set for itself.
Fixed-asset investment in urban areas between January and July rose 27.3% from a year earlier, the National Bureau of Statistics said Friday. The pace exceeded the first half's 26.8% rise and the median 26.5% rise forecast by 11 economists surveyed earlier by Dow Jones Newswires.
While it is too early to judge where the Chinese economy is heading, robust growth in investment and retail sales suggests economic growth will be resilient, despite a slowdown in industrial growth and a contraction in major economies such as the European Union and Japan. (See related article.)
"The slight increase in fixed-asset investment will help alleviate concerns about the magnitude of China's economic slowdown," said Jing Ulrich, chairman of China equities at J.P. Morgan Securities.
The investment pickup reflects rebuilding in regions hit by the massive earthquake in May, she said, adding Beijing could boost government spending in the second half of this year to maintain growth as the global economy weakens and hurts Chinese exporters and manufacturers.
"We need to actively boost domestic demand, to maintain steady economic growth," said Wang Tongsan, head of the institute of quantitative economics at the Chinese Academy of Social Sciences. "Investment is an indispensable part of boosting domestic demand; maintaining investment growth is very important," he wrote in an essay accompanying the data.
Reflecting the public sector's important role in the economy, expansion of central-government investment accelerated to 25.3% in the January-July period from 18.9% in the first half, while investments by state-owned companies picked up to 20.9% from 19.3%.
Late last month, Beijing said maintaining steady growth is as important as curbing inflation, a tweak to its former goals of curbing inflation and preventing the economy from overheating. Since then, Beijing has slightly loosened lending curbs and raised the export-tax rebate on certain textile goods.
The shift could build investor confidence, Moody's Economy.com economist Sherman Chan said. "Investment will likely continue to grow at a breakneck pace in coming months."
Capital goods price increases also likely boosted investment growth. The latest data available from the statistics bureau show that investment prices rose 10% in the first half of this year, accelerating from an 8.6% rise in the first quarter, a pickup that accompanied an increase in raw-material prices.
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