China Factory-Spending Growth Slows as Exports Fall

By Li Yanping

Dec. 16 (Bloomberg) -- China’s spending on factories and real estate rose at a slower pace as property sales fell and export growth collapsed because of the global recession.

Fixed-asset investment in urban areas climbed 26.8 percent in the first 11 months from a year earlier to 12.76 trillion yuan ($1.9 trillion), the statistics bureau said today. That was less than the 27.2 percent gain through October. The median estimate of 14 economists surveyed by Bloomberg News was for a 26.9 percent increase.

Economic growth may slip to 5 percent or below, some economists forecast, before a 4 trillion yuan ($584 billion) stimulus package kicks in next year. Central bank Governor Zhou Xiaochuan said today that the government may add to the steepest interest-rate cuts in 11 years.

“Investment may slow further until the government’s infrastructure stimulus package feeds through,” said Dariusz Kowalczyk, a chief investment strategist at CFC Seymour Ltd. in Hong Kong.

The yuan traded at 6.8490 against the dollar as of 10:21 a.m. in Shanghai from 6.8500 before the data was released.

The benchmark one-year lending rate will fall to 4.23 percent from 5.58 percent by mid-2009 and the central bank will keep cutting the proportion of deposits that lenders must set aside as reserves, Kowalczyk said. The yuan will decline against the dollar, he said.

Real-Estate Spending

Imports and exports fell in November, inflation cooled and industrial production grew by the least since at least 1999. Home sales fel1 20.6 percent in the first 11 months from a year earlier and overall property sales dropped 19.8 percent, the statistics bureau said previously.

Spending growth for real-estate development cooled, rising 22.7 percent in the first 11 months from a year earlier after gaining 24.6 percent through October, today’s figures showed.

Still, planned spending on new investment projects accelerated in November. The increase for the first 11 months was 5.4 percent to 7.75 trillion yuan. Through October, the gain was 3.2 percent.

Premier Wen Jiabao pledged “fast and heavy-handed” investment when the government last month announced spending through 2010 on airports, power grids, railways, roads, rural infrastructure and low-rent houses.

China National Nuclear Corp.’s nuclear power plant in Anhui and China Guodian Corp.’s coal-fired power plant in Henan are among planned projects.

Fixed-asset investment growth may start to quicken because of spending on new projects, the state-run Xinhua News Agency reported today, citing an unidentified statistics official.

Economic Slowdown

China’s economic growth may be 5.5 percent in the first quarter and 4 percent in the second quarter, CFC Seymour estimates. Goldman Sachs Group Inc. sees a rebound after a slide to 4.7 percent in the second quarter.

The government’s 8 percent economic growth target is to generate jobs and avoid social instability in the world’s most populous nation, China Banking Regulatory Commission Chairman Liu Mingkang said in Beijing on Dec. 13.

Overall fixed-asset investment contributed 41 percent of China’s economic expansion last year, and the government expects the stimulus package to add one percentage point to growth, top economic planner Zhang Ping said last month.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net