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Spending on core sector up

By Wang Xu (China Daily)
Updated: 2009-05-13 08:03

Fixed asset investment continued to surge in April thanks to the government's stimulus package, but the nation's exports dropped further, reflecting weaker demand in overseas markets.

The nation's spending on fixed assets such as roads, bridges and new plants grew 30.5 percent in the first four months from a year earlier. That compares with a 28.6 percent surge in the first quarter, the National Bureau of Statistics said yesterday.

Meanwhile, exports dropped 22.6 percent from a year earlier to $91.94 billion in April, the Customs said yesterday. This was steeper than March's 17.1 percent decline. Imports slumped 23 percent in April, compared with a 25.1 percent decline in March.

"We expect fixed asset investment to be the single most important contributor to China's GDP growth in 2009," Jing Ulrich, chairwoman of China Equities at JPMorgan said in Beijing yesterday. Ulrich reckoned that investment could account for 45 percent of China's economy this year, if it maintains a growth rate between 25 percent and 30 percent for the rest of the year.

Related readings:  Urban fixed-asset investment up 30.5% in first 4 months  Jan-Oct urban fixed-asset investment up 27%  Spending breakdown will come out soon  Higher income fuels consumer spending

Analysts said the recent recovery of the housing market was likely to lend more support to investment growth. Real estate investment, accounting for more than one third of the nation's fixed asset investment, grew 4.9 percent in the first four months of the year, up from 4.1 percent for the first quarter.

Meanwhile, the pickup in housing prices may also help fuel investment in the sector. According to the National Development and Reform Commission, average housing prices in the 70 major cities edged up 0.4 percent in April from a month earlier, although it represented a 1.1 percent drop from a year earlier.

Investment represented 42 percent of China's GDP, compared with consumption's 48 percent and net exports' 9 percent. Analysts have long criticized the economy's excessive reliance on investment and exports, which make it particularly vulnerable to economic fluctuation abroad.

"In the short run, the rise of government-led investment is necessary to stabilize the economy," Ulrich said. "But the money should not be spent on building new manufacturing capacity, given the prevalent capacity in some industries."

Investment related to the government stimulus package is expected to help cushion the impact of the drastic decline in foreign demand.

The nation's foreign trade sector provided more than 80 million job opportunities, the Ministry of Commerce said in a statement yesterday. It said the nation's foreign trade sector is still facing serious challenges, despite the government's moves to boost the sector.

The World Trade Organization estimated that global trade is likely to drop 9 percent in 2009, the steepest decline since World War II.

China's leading trade fair, the Canton Fair, concluded last Thursday with export orders down 17 percent, which analysts said was a sign of further weakness of the sector.