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Asset investment growth declines

By Wang Xu (China Daily)
Updated: 2008-12-17 08:08

Workers at the construction site of No 104 State Highway in Laian county, Anhui province. [China Daily]

The nation's spending on fixed assets including bridges, roads and factories further slowed in November, as the global financial crisis took a bigger toll on the export sector.

Fixed asset investment (FAI) grew 26.8 percent in the first 11 months, down from 27.2 percent in the January-October period. That figure is merely the latest to indicate a further slowdown of the nation's economy.

"In the next few months, FAI growth may decline further as the export sector responds to deteriorating external demand and real estate construction activity remains tepid," said Jing Ulrich, JP Morgan's Chairman of China Equities.

China's exports dropped 2.2 percent to $114.99 billion last month, the first monthly decline in seven years. The decrease of foreign demand has forced a number of exporters to suspend operation and put off investment plans.

Meanwhile, the slump in the property sector continued in November as housing sales stagnated. Investment growth in the real estate sector sagged to 22.7 percent during the period, down from 24.6 percent in October.

Analysts say the nation's spending on fixed assets will pick up in the next few months, when the government's stimulus measures start to take effect.

"Now, it's very important for the government to increase spending," Li Daokui, an economics professor from Tsinghua University, said in a forum held on Monday. "If it can make up for some loss in the private sector, we can still expect a growth rate of around 8 percent in 2009."

China has relied heavily on export and investment to fuel its growth over the years. Fixed asset investment accounted for 42 percent of China's total output in 2007 and is the single most important driver of its GDP growth. While the nation's export sector is forecasted to dip into negative growth in 2009, investment would prove even more important for the nation to maintain growth and create jobs.

The nation's real unemployment rate is likely to hit 10 percent in 2009, said the Chinese Academy of Social Sciences (CASS). It also said the nation would have to provide positions for more than 20 million new job seekers annually for the next two years. The nation is expected to create 10 million new job opportunities in 2008.

The government plans to complete a $586 billion stimulus package in the next two years. Over the weekend, it also raised its growth target for money supply to 17 percent in 2009, compared with 16 percent in 2008. The move is designed to guarantee loan growth and spur domestic investment and consumption.