China 2007 investment may rise 25%

Updated: 2007-04-29 06:51

China's investment in fixed assets may grow by one-fourth again this year, as the government seeks to maintain spending on key industries while curbing energy- wasting projects, a government researcher said.

"Despite the government's strengthened controls over local projects, fixed-asset investment may continue to grow at around 25 percent," Zhang Hanya, a senior researcher at the National Development and Reform Commission's Investment Research Institute, said at a financial conference in Beijing today.

Premier Wen Jiabao said last week that his government will further tighten controls over fixed-asset investment, curb lending and narrow a widening trade surplus. China is trying to prevent an economy that grew 11.1 percent in the first quarter from overheating.

Urban investment in factories and real estate jumped 25.3 percent in the first quarter from a year earlier, rising from 24.5 percent for all of 2006, government data show.

China still needs the economy to grow around 10 percent a year and fixed-asset investment around 24 percent to boost demand at home and provide enough jobs, Zhang, the top planning agency's economist, said today.

"The government wouldn't like to see investment expansion fall below 20 percent and economic growth shrink to lower than 8 percent such as around 1998, when the economy was slumping, and the government faced great difficulty in boosting domestic demand and easing unemployment," he said.

Investment Growth

Current domestic conditions favor the growth of investment, such as more than 6 trillion yuan ($778 billion) of idle funds at banks ready to be lent out, a sufficient capacity of fuel, electricity and transportation, and rising profits at industrial companies waiting to be re-invested, Zhang said.

The government will support areas that need more spending, such as infrastructure construction, he said, while limiting new investment elsewhere. Starting last year, China has tightened land and project controls and asked commercial banks to set aside more funds as reserves to reduce funds available for lending.

The top planning agency said this week it will try to restrain growth in industrial production. Energy conservation and environmental protection must become priorities to prevent industrial growth from wasting energy and further polluting the environment, the agency said.

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