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Core investment buoyant

By Zhang Ran (China Daily)
Updated: 2009-03-12 07:50

Workers laying tracks on the Fuzhou-Xiamen railway in Fujian province. Jiang Kehong

China's 4-trillion yuan stimulus package has helped boost investment in its fixed assets, which surged by 26.5 percent year-on-year in the first two months of the year. The rate of increase was 26.1 percent in 2008.

Related readings:  Incentives will lift country's economy  Foreign equipment makers may reap stimulus bonanza  Energy: Steel sector gets booster package  Local govts competing for investment to prevent slowdown

Fixed asset investment, or FAI, in urban areas rose to 1.03 trillion yuan from a year earlier, according to figures released by the National Bureau of Statistics (NBS) yesterday.

The figure is higher than the 21.5 percent estimate put forward by a couple of economists earlier.

"The figure is stronger than expected," Wang Qian, researcher with JPMorgan Chase Bank told China Daily. "The notable rebound reflects the impact of the government's growth-supportive policies on both the fiscal and monetary fronts."

Ever since the stimulus package was announced last November, two major allocations have been made: 100 billion yuan in the fourth quarter of last year and 130 billion yuan so far in the first quarter of 2009. In line with the original plan, much of the funds has been earmarked for infrastructure related investments.

"The data suggest that domestic demand, especially investment demand, has remained very strong, despite the global economic downturn," Sun Mingchun, economist with Nomura International (HK) Ltd said.

"As the impact of the government's 4-trillion yuan stimulus gradually comes through, we expect growth in FAI to increase in the months ahead," Sun predicted.

FAI is the most important driver of China's economic growth and accounts for 42 percent of the GDP.

"Increased infrastructure investment from China's fiscal stimulus package should partially offset decreased investment by export manufacturers and property developers," Jing Ulrich, managing director and chairwoman of JPMorgan China Equities said.

The National Development and Reform Commission recently announced that detailed information on stimulus expenditure would be made available soon. The specifics are likely to be announced once the National People's Congress approves the annual budget.

"It will help guard against overlapping infrastructure projects which may lead to excess capacity," Ulrich said.

Yesterday's NBS figures also showed that central government investment projects had picked up steadily in recent months, rising solidly at 40.3 percent year-on-year.