China's exports slump, investment rises

(Agencies)
Updated: 2009-03-11 15:24

Investment Perks Up

But other figures released earlier by the National Bureau of Statistics suggested that the government is already enjoying some success in its drive to make up for the shortfall in exports by boosting capital spending.

Investment in urban areas in fixed assets such as roads, power plants and apartment buildings rose 26.5 percent in January and February from a year earlier, easily beating market forecasts of a 21.5 percent increase.

"The figure shows the economy is doing very well and Beijing's stimulus package is working," said Jiang Chao, an analyst at Guotai Junan Securities in Shanghai.

In all of 2008, urban fixed-asset investment was up 26.1 percent.

The combined number is meant to smooth out distortions caused by the Lunar New Year, which fell in January this year but in February last year.

Yu Song and Helen Qiao at Goldman Sachs said the rebound in investment came sooner than they had expected, increasing the likelihood of an upside revision to their forecast of domestic demand.

A breakdown pointed to the initial impact of the 4 trillion yuan ($585 billion) stimulus plan unveiled in November.

Spending on projects backed by the central government rose 40.3 percent in the first two months, while investment in transport, including railways, rose a whopping 210.1 percent.

"There's no doubt that fixed-asset investment will be on an upward trend in the first half of this year, given the capital being injected into infrastructure and public housing," said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.

Bank lending is surging; cement and steel output rose 17 percent and 2.4 percent, respectively, in the first two months, while the decline in power demand slowed; and car sales topped 800,000 in February for the first time in eight months.

But other statistics suggest China is not out of the woods yet. Investment in China's real estate sector was just 1.0 percent higher than in the first two months of last year; inventories of raw materials such as coal have started to mount again; and a rise in prices of steel proved to be short-lived.

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