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Fast pace of investment to slow down
By Xu Dashan (China Daily)
Updated: 2004-04-09 08:33
China's fast fixed asset investment is expected to slow down from the second
quarter of this year, economists say.
Zhu Jianfang, an economist at China Securities, says the fast investment
during the first two months of this year could not be maintained throughout the
year.
Since the second half of last year, the central government has taken a series
of measures to prevent the fixed asset investment from growing too much.
These measures include raising the bank reserve requirement, tightening loans
to the steel, aluminum and cement industries, and beefing up management over
development zones.
"The measures will have a great impact on the fixed asset investment this
year," he said.
However, strong momentum in fixed asset investment will continue, because of
the increasing role of private investment, he said.
The country's fixed asset investment is likely to rise about 20 per cent this
year compared with the 26.7 per cent growth of last year, he said.
Zhang Liqun, a senior researcher with the State Council's Development
Research Centre, said there was no reason to say the country's fixed asset
investment would speed up this year, although it grew 53 per cent during the
first two months.
"We can not judge the whole year's fixed asset investment situation, based on
the figures for the first two months," he said.
The fixed asset investment during the two months accounted for less than 10
per cent of the year's total, he said.
Any special events in the two months could mean big changes to the figures,
he said.
For example, the first two months of this year was one day longer than the
same period last year.
Rural workers returned to work earlier this year, because Spring Festival was
in January while last year's festival was in February.
Some companies who believe prices of raw material would rise further, speeded
up the completion of their projects.
But Qi Jingmei, an economist with the State Information Centre, said the
growth during the first two months was unexpectedly fast - even given possible
inaccuracies due to recent statistical adjustments.
"The situation gives us little reason to be optimistic (about the prospects
for inflation)," she added.
The Chinese economy rose 9.1 per cent last year, fuelled largely by the fast
fixed asset investment.
But over-investment was found in the sectors of steel, cement, aluminum, as
banks lent aggressively to tap the growth momentum.
Fan Gang, director of the National Economic Research Institute, said an
overheating of some industries including automobile construction, steel,
aluminum and cement, could have a serious impact on the economy.
"If it is not cooled, the investment fever in some industries will heavily
affect China's robust economic growth," Fan said.
Excessive growth in some sectors is putting a strain on transportation and
power suppliers, driving up the prices of raw materials and damaging industries
across the country, he said.
Many of the newest projects rely on outdated technology and equipment,
affecting their ability to control pollution, he said. The projects also tend to
consume high levels of energy.
Lin Yueqin, an economist with the Chinese Academy of Social Sciences, said
the automobile sector was a typical example of the unpredictable situation, with
existing producers competing with each other to expand their production
capacity.
Small scale and weak independent development capabilities were problems. From
70 to 123 plants were capable of producing whole vehicles, but less than 10,000
units each per year.
Meanwhile, local governments are all eager to launch new auto-related
projects, Lin said.
Small iron and steel works, which were previously closed by local governments
because of pollution and inefficiency, had resumed production.
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