China's economy grows 9.5% in the first half (Agencies/chinadaily.com.cn) Updated: 2005-07-20 13:12 The government nearly two years ago stepped up its campaign against surging
investment with a cocktail of administrative and monetary policies to cool
overheated sectors within the economy.
This undated photo
captures a building complex under construction in Pudong, Shanghai.
China's housing price grew by 5.7 percent in the first six months this
year. [newsphoto] | While it has seen some results, fixed asset investment, which largely
reflects government spending on infrastructure, still grew at 25.4 percent
year-on-year in the six months to June.
This was some 3.2 percentage points lower than in the same period last year,
but way above the 16 percent target for the year. In June alone, urban
investment rose 27.1 percent year-on-year.
Analysts said the brisk growth in the second quarter seems to have been once
again driven by fixed asset investment.
"The (growth) level shows the economy is still pretty strong and accelerating
in the second quarter," said Huang Yiping, an economist at Citigroup.
"Plus, asset investment is still very strong and the aggregate investment
levels show that the overall situation continues to deteriorate."
Huang said the structure of investment has improved in areas where excess
capacity was an issue but otherwise in areas where there are bottlenecks such as
coal and electricity, overinvestment continues to be a problem.
"Inflation remains very modest ... sligthly lower than the previous month.
However, rather than saying that there is no inflation problem, the high levels
of investment are leading to some deflation as you build up overcapacity and
prices come down," he said.
"All these problems point to overinvestment as the key."
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