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Factory, property spending growth slows on loan curbs

Industrial output in Nov grows slowest, while loans rose the least in 8 months

(BEIJING) China’s factory and property spending growth has slowed – another sign that government lending curbs may be starting to cool the world’s fastest-growing major economy.

Fixed-asset investment in urban areas rose 26.8 per cent in the first 11 months from a year earlier, the statistics bureau said yesterday, after gaining 26.9 per cent through October. Economists calculated November’s increase at about 26 per cent, down from October’s 30.7 per cent.

Industrial output grew at the year’s slowest pace in November, outstanding loans rose the least in eight months and export growth stayed at reduced levels. Those signs may do little to ease central bank concern that the economy is overheating after inflation surged to an 11-year high and the trade surplus swelled.

‘It’s a slight moderation in connection with the tightening efforts but growth is still very strong,’ said David Cohen, an economist at Action Economics in Singapore. ‘Another interest rate increase before the end of the year would be consistent with avoiding overheating.’

The yuan traded at 7.3712 at 12:07pm after closing at 7.3692 on Thursday. The yield on a 15-year bond was little changed at 4.72 per cent.

The median estimate of 18 economists surveyed by Bloomberg News was for a 26.6 per cent increase in 11-month investment.

Investment in the oil and natural-gas industries rose 9.6 per cent through November, a slower pace than the 12.3 per cent gain in the first 10 months. Railways and transportation also had weaker growth.

Spending in the first 11 months rose to 10.1 trillion yuan (S$1.98 trillion), more than the size of Canada’s gross domestic product last year.

‘It’s too early to call it a slowdown – we need three months of data,’ said Stephen Green, senior economist at

Standard Chartered Bank in Shanghai. He predicts three interest rate increases next year, more investment controls, and a faster pace of yuan appreciation that will slow inflows of cash from exports.

Investment accounted for 42.5 per cent of China’s GDP in 2006, compared with 24 per cent in Japan, 20 per cent in the US and 17 per cent in Germany. The number of new projects rose by 24,124 from a year earlier to 211,127 in the first 11 months, the National Bureau of Statistics said yesterday.

 

Source: Bloomberg (Business Times 15 Dec 07)

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