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To: goldsnow who wrote (8657)	3/22/1998 12:55:00 PM
From: goldsnow	Respond to of 116762

China '98 growth seen relying on investment 04:04 a.m. Mar 22, 1998 Eastern By Paul Eckert BEIJING, March 22 (Reuters) - China must invest heavily this year to stimulate its economy in the face of flagging consumption and exports, a cabinet think-tank said in a report seen on Sunday. Investment would have to grow between 12 percent and 15 percent this year to ensure China would hit this year's target for economic growth of 8.0 percent, according to a report by the State Council Development Research Centre. A real investment increase in that range would bring economic growth of between 7.7 percent and 8.5 percent, said the report, excerpts of which were published in the China Daily. China posted growth of 8.8 percent last year, but the prolonged Asian financial crisis has cast a cloud on its prospects this year. Domestic markets are glutted as a result of an investment frenzy in the early 1990s which produced overcapacity in many sectors. Exports are expected to fall as China's Asian markets shrink and those countries gain market share at the expense of Chinese firms as a result of their depreciated currencies. China has pledged it would not devalue its yuan. January-February exports rose 15.7 percent from a year earlier, representing weaker growth than the 20 percent full-year rise seen between 1996 and 1997. Premier Zhu Rongji last week vowed Beijing would boost economic growth with an infrastructure spending spree, investing in everything from housing to highways and high technology. ''We must ensure that China's economic growth reaches 8.0 percent this year,'' he said, outlining one of his chief goals in his first news conference after he was elected unopposed by China's parliament. Daryl Ho, regional economist at Jardine Fleming Asia, said: ''Zhu has to reflate domestic demand to offset the slowdown in external demand, including slowing exports and foreign direct investment.'' The China Daily on Sunday called Zhu's ambitious spending programme ''the Chinese version of Roosevelt's New Deal.'' However, Zhu did not give figures or details on infrastructure spending or fixed asset investment. Zhu's close ally, central bank chief Dai Xianglong, earlier this month said China would spend $1 trillion on infrastructure in the next three years, and as much as $361 billion this year. Dai, in a news conference during the annual session of parliament which closed last week, said investment in fixed asserts could grow by as much as 15 percent this year. He gave the higher figure after financial markets and economists reacted with dismay to the official plan presented to parliament set investment growth at 10 percent. The economist Ho said China could spend a lot to improve basic infrastructure in inland areas which have not gained from China's rapid economic growth over the past decade. Although the details of Zhu's New Deal are scant, Chinese economists already are hopefully forecasting knock-on effects of the massive infrastructure build-up. ''The new projects' push on the economy can be seen as soon as the orders are placed,'' said Li Shantong, head of the team that drafted the State Council report. The build up of railways and roads would boost the country's ailing steel and truck manufacturing sectors, the China Daily said, without giving figures. Copyright 1998 Reuters Limited. All rights reserved.