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Investment growth in high gear
By Xu Binglan (China Daily)
Updated: 2004-11-18 01:57

China's investment growth, a leading force buoying the country's rapid economic development, remained in high gear in October despite a moderate slow-down. But the growth of real estate investments, also a closely-watched figure, is also on the rise.

Nationwide fixed asset investment grew by 29.5 per cent on a year-on-year basis during the January-October period, the National Bureau of Statistics said yesterday. This compared to 29.9 per cent during the first nine months.

That indicates that the rate for October alone was around 25 per cent, still quite a high figure.

China's gross domestic product (GDP) grew by 9.5 per cent in the first three quarters of this year, which economists say they believe is too fast.

In 2002, China's GDP rose by 8 per cent -- a more acceptable and sustainable rate -- while fixed asset investment rose 16 per cent.

Led by booming investment in the real estate sector, investments in many sectors rocketed during the first quarter of this year.

Fixed asset investment rose a superheated 47.8 per cent during that period, which prompted the central government to take a slew of cooling-down measures. New investment in steel, aluminum and cement was banned. Converting farmland for industrial use was also strictly restricted.

Those measures brought fixed asset investment growth rate down to 31 per cent for the first six months.

However, many analysts say the key underlying reason for the rapid investment growth -- the red-hot property sector -- still provides incentive for fast growth because low interest rates encourage both developers and home buyers to invest money.

After months of deliberation, the central People's Bank of China raised the interest rate, for the first time in nine years, late last month. But the interest rate increase's effects on investment growth still need time to go to work.

At the end of October this year, investment growth in the real estate sector was still high.

The National Bureau of Statistics said investment in the sector climbed by 28.9 per cent during the first 10 months. The rate is 0.6 percentage points higher than the figure for the first nine months.

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