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Textile firms turn wary on fixed asset investment

(Xinhua)
Updated: 2008-05-08 11:54

The textile industry's fixed asset investment growth slowed in the first quarter in response to monetary tightening and the worst winter in 50 years, according to the National Development and Reform Commission (NDRC).

The industry invested 44.1 billion yuan ($6.30 billion) in fixed assets, up 13.1 percent year-on-year. Investment growth was 31.6 percent last year during the same period, the NDRC said.

For fibers alone, fixed asset investment rose 2.1 percent, which was 24.7 percentage points lower than the same period last year. Investments from the fabric and costume sectors rose 9.2 percent and 26.9 percent, but these increases were 10.1 and 10.3 percentage points lower, respectively, year-on-year.

Wang Qianjin, the chief editor of WebTextiles -- the site for China's textile industry -- attributed the slowdown in investment to government policies aimed at cooling economic growth and inflation.

The economy grew 10.6 percent and inflation hit 8 percent in the first quarter, according to official statistics.

China adopted tighter monetary policies starting in early 2007, raising interest rates and the banks' reserve ratio several times. These measures have undermined investors' confidence, which in turn affected fixed asset investment, the most powerful engine for the textile industry, said Wang.

A sharp fall in investment could delay technological improvements and hamper industrial upgrades, Wang added.

An earlier survey by the China Cotton Textile Association found that rising costs and a difficult policy environment were squeezing the textile industry, to the point where nearly half of the companies surveyed were considering moving into other industries.