Fixed assets adopt healthier pace
Urban fixed asset investment grew 24.5 per cent year on year during the first two months of this year, the National Bureau of Statistics said yesterday.
The bureau, which did not give separate figures for January and February, said urban fixed asset investment stood at 422.2 billion yuan (US$50.9 billion) in the period.
The main drivers of the growth were investment in coal mining, oil refining, and utilities, which grew by 148.7 per cent, 46.1 per cent and 59.5 per cent, respectively.
Investment in the agricultural sector also picked up to 69.9 per cent in the January and February.
Investment in ferrous metal smelting, and non-metal mining decreased by 9.0 per cent and 7.7 per cent respectively.
Wang Zhao, a senior researcher with the State Council Development Research Centre, said investment growth for the first two months was healthy.
In 2004, the growth of urban fixed-asset investment was 27.6 per cent.
"It suggests the government's macro-control measures are working," he said.
Liang Hong, an economist with Goldman Sachs (Asia), said: "Strong fixed asset investment growth, together with healthy retail sales, confirms our baseline view that domestic demand remains robust in China and growth prospects in 2005 looks increasingly firm."
Peng Longyun, a senior economist with the Asian Development Bank, agreed the growth was encouraging.
"It was on the way to become reasonable," he said.
Peng said he believes China's first quarter gross domestic product growth would be 8.5 per cent, but Wang said the growth could reach 9 per cent.
However, Peng said investment growth for the first two months was still a fast rate.
"The growth was based on relatively high figures for the first two months of last year," he said.
China's urban fixed asset investment rose 53 per cent year-on-year during the first two months of last year, which aroused worries among government officials and economists that the country's economy might get overheated.
They expressed worries that excessive fixed asset investment growth in some sectors such as cement and steel could have a serious impact on the economy.
As a result, the government took a series of measures to try to curb over-investment.
"It would be better if investment could decline a further 1 percentage point for the first two months," Peng said. "A more reasonable rate should be about 20 per cent or slightly higher," he added.
The growth figure for the first two months suggests the government should not relax its macro-control measures this year.
The government should continue to curb investment in other areas such as steel and cement, he said.
The National Development and Reform Commission said the government would beef up co-ordination among its macro-economic policies to prevent fixed asset investment from growing too fast this year.
The government would continue to tighten management on land supply and credit, the commission told the annual session of the National People's Congress earlier this month.
China is targeting a fixed asset investment growth of 16 per cent for this year and a gross domestic product growth of 8 per cent, the commission said.
(China Daily 03/17/2005 page1)