Friday, September 16, 2005

China's Benchmark Measure Of Capital Expenditure Rises

September 16, 2005

BEIJING -- China's urban fixed-asset investment grew faster than expected in August, partly because of the low base a year earlier.

But fixed-asset-investment growth continues to ease when compared with recent years, suggesting that authorities won't see a need to rein in economic growth by tightening monetary policy, economists said.

The National Bureau of Statistics said Thursday that urban fixed-asset investment, China's benchmark measure of capital expenditure, grew 28.5% in August from a year earlier, beating expectations of a 24.3% gain, and up from 27.7% in July.

For the first eight months of the year, urban fixed-asset investment totaled 4.12 trillion yuan ($509 billion), up 27.4% from a year earlier.

Fixed-asset-investment growth has been declining from around 40%-50% in 2003 and part of 2004. Economists said that even if fixed-asset-investment growth remains at current levels for the rest of the year, policy makers won't issue fresh measures to curb lending.

"There's no sign of loosening credit right now...looking at the figures for yuan-lending growth or the mid- and long-term lending growth," said Lu Wenlei, an analyst from SYWG Research and Consulting in Shanghai. He noted that yuan-denominated lending at the end of August was up 13.4% from a year earlier, and mid- and long-term loans were up 17.8% from a year earlier.

This shows that the domestic economy is still on track to cool down somewhat, he said.

"Fixed-asset-investment growth will keep declining for the rest of the year," said Zhang Le, an analyst from China Merchants Securities in Shenzhen, though he estimates that fixed-asset-investment growth will stay above 25% for the rest of 2005.

The stronger fixed-asset-investment growth last month comes after China said its key money-supply indicator in August expanded at its fastest year-to-year rate for 2005 so far. The August M2 money supply rose 17.3% from a year earlier, exceeding the central bank's target of 15% for 2005 for the third straight month.

China's national fixed-asset investment grew 25.8% last year, while urban fixed-asset investment -- which includes a large portion of national data -- grew 27.6%. National fixed-asset investment is issued only on a quarterly basis.


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