China's fixed-asset investment up Wednesday, June 18, 2008

China's spending on fixed assets such as factories and warehouses grew 25.6 percent year-on-year in the first five months, as investment momentum continued to slow down.

The figures released by the National Bureau of Statistics yesterday is below the 25.9 percent increase in the same investments during the same period last year and is also lower than the 25.7 percent growth during the January- April period.

Investment growth was "sluggish", given that the government shortened a holiday from a year earlier, Goldman Sachs economists Liang Hong and Song Yu said in a research note.

The slowdown came after the government adopted a slew of austerity measures to prevent the economy from overheating. Analysts say given the increased investments on the infrastructure of the snowstorm-hit area, the real slowdown is higher than the statistics suggest.

The total fixed-asset investments amounted to 4.03 trillion yuan in the first five months, of which 951.9 billion yuan went to the real estate sector, representing a 31.9 percent growth year-on-year.

Overseas investors have contributed to the slowdown, as rising costs and strong renminbi are squeezing profit margins in the nation, said Shen Minggao, an economist with Citigroup.

Investments by Hong Kong, Macao and Taiwan enterprises rose only 14.1 percent year-on-year in the first five months. Foreign investment expanded 16.7 percent. Both figures are weaker than that of the January-April period. Meanwhile, domestic companies' investment on fixed assets climbed 27.1 percent during the period.

Previous reports said about one-third of Hong Kong- and Taiwan-funded companies in the Pearl River Delta region had planned to pull out of the region, facing rising costs. In March, it was reported that a group of South Korean companies had closed down their operations in Shandong province, also due to cost pressure.

"Such change probably suggested that rising production costs have deterred some overseas investors," said Shen, adding "the signs of slowing growth could reduce the odds for the government's tendency for rate hikes in the rest of the year".

The number of new projects has been rising, up to 84,368 in May, up from 59,676 in April. This sudden flood of new projects may continue in the months to come, as the nation continues to invest heftily in reconstruction in the earthquake-stricken areas.  

Editor: An Lu
Source: China Daily