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Investment growth set to slow
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Fixed-asset investment growth is expected to slow this year under tighter macro controls, but it won't be easily achieved, according to analysts.


Central authorities pledged further tightening measures to prevent the economy from overheating and rising prices from evolving into entrenched inflation at its annual Central Economic Work Conference in early December.


"The message should be well received this year," said Chen Gong, chairman and chief analyst of Beijing-based Anbound Consulting. "In terms of fixed-assets investment, the growth should cool down."


The central government has vowed to take measures like strengthening control of new construction projects. In November, it ordered that new projects must be authorized and abide by the rules. It also called for improved management of investment projects worth more than 50 million yuan.


Credit is also widely expected to be tightened this year. The banking regulator reportedly asked commercial banks to cut their lending plans for 2008.


"This should contribute to a slowdown in investment growth," said Wei Weixian, an economist at the University of International Business and Economics (UIBE).


But China still has many cards to play - including semi-administrative tools - to cool the economy, said Liu Xiahui, an economist from the Chinese Academy of Social Sciences.


Industrial policies like reining in investment projects that endanger the local environment may also be increasingly used this year, Liu said. "The National Development and Reform Commission may take a more active role in this process," he said.


According to Fan Jianping, head of the economic forecast department at the State Information Center, growth of overall fixed-asset investment could be 23.5 percent this year, about 2 percentage points lower than in 2007.


Despite the forecast investment slowdown, analysts warned it will not be easily achieved.


China will continue to face the problem of excess liquidity, which will put pressure on investment growth, Anbound's Chen said.


"Construction of new projects would in turn bring in more capital, as they may take more than a year," he said.


This "unhealthy" cycle would have an impact on policymakers' efforts to cool investment growth, he said.


By the end of November, there were 211,000 new investment projects in place, 24,000, or 12.8 percent, more than a year earlier.


The world economy, which is expected to weaken this year as the US-based subprime crisis worsens, may also have a bearing on China's investment situation, said UIBE's Wei.


(China Daily January 2, 2008)


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