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China's fixed investment continued to surge in the first two months of the year, refueling inflationary pressures that many fear threaten the nation's robust economic growth.
The National Bureau of Statistics (NBS) said Wednesday urban fixed investment during the January-February period soared by 53 percent on a year-on-year basis, which compares to 26.7 percent recorded last year.
"That was fast growth despite possible inaccuracies due to recent statistical adjustments," said Qi Jingmei, an analyst with the State Information Center.
"The situation gives us little reason to be optimistic (about the prospects for inflation)," she added.
This year, the NBS adjusted the way it calculates fixed asset investments by adding those made by collectively and privately owned businesses. But it said the new figures are still comparable to last year's after adjustments.
The Chinese economy grew a robust 9.1 percent last year, with fixed asset investments seen as the biggest driver in comparison to the other two growth engines of consumption and exports.
But over-investment was found in the steel, cement, aluminum as well as real estate and auto sectors as banks lent aggressively to tap the growth momentum.
The NBS did not give separate figures for investment in those sectors, but said investment in ferrous metal mining and processing, which mainly includes steel, jumped by a rare 176.2 percent on a year-on-year basis.
Investment in non-metal minerals, which covers cement, surged by 137.4 percent.
Real estate investment, which now covers real estate development - where concerns of overheating are present - as well as logistics and other services, rose by 43.6 percent, the bureau said.
"Investment in over-invested sectors is still growing rapidly, which needs special attention," Qi said.
Accelerating investment will lead to price increases and push up the consumer price index, the key gauge of inflation, but she said it remains difficult to judge when the upward pressure will become evident in prices.
Goldman Sachs also expressed its concerns yesterday, saying the fixed investment data confirmed its view that "the sources of funding for investment remain ample, reflecting the return of an appetite for investment in the private sector, and only a marginal softening of bank lending."
Liang Hong, China economist at Goldman Sachs, said in a report: "This is a clear testament to the strength of fixed investment going into 2004, and poses a difficult challenge for the government to moderate investment growth through administrative methods."
(China Daily March 18, 2004)
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