China's investment eases, economy holds

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Beijing, May 15: : Chinese investment in fixed assets such as property and factories slowed slightly in April but not by enough to alter the picture of a sturdy economy that is holding up well in the face of stiffening global headwinds.

Spending on fixed assets in urban areas rose 25.7 per cent in the first four months from 2007, compared with a 25.9 per cent increase in the first quarter, the National Bureau of Statistics said on Thursday.

Although the reading was a touch below market forecasts of a 26.2 per cent rise, there were fewer working days this April than in April 2007 because of changes to China's schedule of public holidays.

"It seems that significant momentum is being sustained in the Chinese economy despite all the global uncertainties," said David Cohen with Action Economics in Singapore.

"China remains a key engine of growth for the world economy."

The bureau did not issue data for April alone, but Goldman Sachs economists calculated that investment in the month was up 25.3 per cent from 2007, against 27.3 per cent in March.

"We believe the underlying growth momentum of fixed-asset investment has been robust," Yu Song and Hong Liang told clients.

Policy makers have been trying to prevent over-investment, fearing an ample supply of easy money could fuel wasteful spending that might saddle banks with new bad loans.

A particular concern is real estate, where investment in the January-April period rose a strong 32.1 per cent.

Projects that consume a lot of energy and spew out pollution are also attracting close scrutiny. But Beijing wants to avoid too sharp a slowdown in investment, which has been the main driver of China's double-digit growth in recent years.

Beijing instead is trying to redirect spending towards the interior and to sectors where China still has great needs, such as affordable housing and rural infrastructure.

That focus will sharpen given the need for reconstruction after this week's devastating earthquake in southwestern China and fierce winter storms that badly damaged transport and power supplies across southern China in January and February.

"There is a high possibility that investment will rebound in the second half," said Tang Jianwei, an analyst at Bank of Communications in Shanghai.

"Reconstruction after the snow disaster and earthquake will also drive investment growth, as you can see that many houses and roads were destroyed in the earthquake in Sichuan," he said.

Looking strong

The investment report was the last of China's major economic indicators for April.