Investment heating up, exports slowing in China
The country's urban fixed-asset investment -- spending on productive capacity in the cities -- rose 27.3 percent in the first seven months of 2008 compared with a year earlier, the National Bureau of Statistics said.
"In July, fixed-asset investment again accelerated to a certain extent," the statistics bureau said in a statement. "That will help in tackling the issues arising from a weakening in external demand."
The bureau did not publish a figure for the month of July alone, but it was clear that an acceleration had taken place.
Based on previous figures from the bureau, it would seem that fixed-asset investment increased by about 30 percent in July from the same month a year earlier.
"Urban fixed-asset investment has maintained a growth level of about 25 percent every month," the statement said. "That's an important accomplishment."
In recent months, fixed-asset investment has received a boost from massive government spending on the Beijing Olympics and reconstruction projects after the earthquake that hit the southwest in May, analysts said.
By contrast, recent data showed China's trade surplus declined 9.6 percent in the January-July period from the same period last year, confirming the impact of the US-led global economic slowdown.
China's exporters have also seen their competitiveness eroded somewhat by the rise in the local currency, the yuan, against the US dollar over the past three years, analysts said.
"Domestic demand will certainly have to play the leading role (in creating economic growth)," Wang Qian, JP Morgan's economist in Hong Kong, told AFP.
Retail sales -- the prime gauge of domestic consumer spending -- helped boost domestic demand, rising 23.3 percent in July from a year earlier, according to government figures released earlier this week.
This is a nominal figure, meaning the steep rise to some extent is merely a result of high inflation, but higher incomes also helped spur consumption, according to economists.
But despite robust growth in investment and consumer spending, chances are the economy as a whole is shrinking.
Economic growth in China slowed to 10.4 percent in the first half from 11.9 percent for all of 2007.
Observers said this would add further urgency to a decision by Beijing to no longer focus exclusively on inflation control and care more about growth creation.
"It's out of the question that current policy will be further tightened," JP Morgan's Wang said, adding the government would loosen controls on particular sectors and help small and medium-sized companies get access to loans.
Knowledge that the government wishes to spur more growth might in itself boost fixed-asset investment in the coming months, said Sherman Chan at Moody's Economy.com in a research note.
"As the authorities appear to have now shifted their top priority from curbing inflation to fuelling economic growth, investors keen to enter the Chinese market have been given an injection of confidence," he said.
"Investment will likely continue to grow at a breakneck pace in coming months."