Urban investment up 27%

China's urban fixed-asset investment grew to 8.49 trillion yuan in the first eight months of 2008, up 27.4 percent year-on-year, the National Bureau of Statistics said yesterday.

The figure outpaced the growth rate for the first seven months of this year by 0.1 of a percentage point. This indicates a slight pick-up in investment in August, despite construction restrictions adopted for the Olympics in Beijing and areas surrounding the capital.

Fixed-asset investment is likely to rebound further in the months ahead, said Lian Ping, chief economist of Bank of Communications.

China's economic growth slowed to 10.1 percent in the first half of this year, down from 11.4 percent for the whole of 2007. The deceleration came as foreign demand weakened and the government adopted tightening measures to rein in investment. Meanwhile, natural disasters such as March's snowstorms and the May 12 earthquake also disrupted economic activities in the affected regions.

In the following months, reconstruction work will step up a gear, said Lian. "And local governments might also launch new projects to cushion the impact of the decline in exports.

The government already moved to relax loan restrictions for commercial banks in August, an indication of policymakers' growing concern about a possible economic slowdown and their desire to encourage growth. The restrictions, adopted last year, were seen as one of the government's most effective measures to calm the investment frenzy.

Investment growth in primary industries, including farming, fisheries and forestry, rose to 63.5 percent year-on-year in the first eight months. Meanwhile, investment grew 28.8 percent in secondary industries, while tertiary industries witnessed a 25.5 percent rise .

Investment in real estate declined to 29.1 percent year-on-year in the first eight months of the year, down from 30.9 percent in the first seven months.

This implies that its growth in August was only 18.9 percent year-on-year as compared to 37.5 percent in June, said Sun Mingchun, an economist with Lehman Brothers.

This is consistent with anecdotal evidence that the property sector is under severe pressure because of a gloomier economic outlook and the lack of funds.

In August, bank loans for fixed-asset investment went up 14.8 percent compared with the same period a year ago. In the meantime, funds raised by the enterprises themselves, most of which were their profits, were up by a robust 32.6 percent.

In contrast, foreign funding earmarked for fixed-asset investment increased by a mere 6 percent in August from a year earlier.