Reconstruction efforts fuel rise in investment

China's urban fixed-asset investment rose to 27.3 percent in the first seven months from 26.8 percent in the first half, the National Bureau of Statistics said yesterday.
The amount of FAI in the January-July period settled at 7.2 trillion yuan (US$1.05 trillion), fueled by reconstruction work in Sichuan Province after the May 12 earthquake, analysts said.

Spending by Chinese mainland enterprises gained 28.2 percent to 6.43 trillion yuan. Foreign investment rose 19.8 percent to 409.3 billion yuan while investors from Hong Kong, Macau and Taiwan raised their investment by 19.7 percent to 335.6 billion yuan.

The reconstruction work after the earthquake and the snowstorm requires huge capital input and it becomes a stimulant to bolster investment growth, said Li Maoyu, of Changjiang Securities.

Peng Ken, a Citigroup economist, said: High commodity prices and shortages likely attracted the additional capital into mining while the start of reconstruction efforts in the quake-stricken regions could have boosted investment that is likely to continue to support growth through the rest of this year and into 2009.

The central government plans to transfer 70 billion yuan to fund reconstruction work in Sichuan over the next three years.

Meanwhile, the State Council has ordered 19 provinces in eastern and central regions to help rebuild roads, power lines, factories and homes in the province.

China's retail sales surged 23.3 percent in July to 862.9 billion yuan, the fastest pace since 1996.

The People's Bank of China has not moved the interest rate so far this year, to which investments are more sensitive than an increase in the reserve requirement ratio.

The stable investment to the end of July can improve the output outlook after industrial production cooled to 14.7 percent last month, the slowest since February last year.

In the first seven months, spending on property development added 30.9 percent to 1.59 trillion yuan.

Investment in coal exploration and production jumped 37.5 percent to 104.5 billion yuan while petroleum and natural gas spending rose by 33.5 percent to 126.5 billion yuan.