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China's investment growth slows, prices fall
Published on: 2009-08-11
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BEIJING -- China's investment growth slowed in July, and consumer and ex-factory prices extended declines, government data showed Tuesday, buttressing the case for the government to keep its expansionary policies in place.


While industrial production growth quickened, the pickup was slight and well below market expectations.


The data support Beijing's assessment that the economic rebound's foundation isn't firm, given the world remains in a recession. Top leaders, including Premier Wen Jiabao, have repeatedly pledged in recent days to continue the moderately loose monetary policy and stimulus spending program.


Urban fixed-asset investment between January and July rose 32.9% from a year earlier, slowing from the first half's 33.6% rise, according to the data issued by the National Bureau of Statistics. The growth rate was also lower than the survey's median estimate of a 34.0% increase.


In recent weeks, Beijing has warned that it will curb blind investment, indicating it is concerned over possibly wasteful investments under the stimulus. The investment data Tuesday show growth of investment projects under central and local governments and by state-controlled companies in the January-July period slowed from the first half.


Value-added industrial production expanded 10.8% in July from a year earlier, below the median 11.5% gain forecast by 13 economists polled earlier by Dow Jones Newswires. The rate of growth was slightly higher than June's 10.7% rise.


China's retail sales rose 15.2% in July from a year earlier, accelerating from June's 15.0% growth rate. While the data include government purchases, they suggest private-consumption remains resilient.


Reflecting weak demand in the economy, China's consumer price index fell 1.8% in July from a year earlier, the sixth straight monthly decline, government data showed.


July's CPI decline was in line with the median forecast of a 1.8% fall in a Dow Jones Newswires survey of 14 economists, but was slightly larger than June's 1.7% drop.


China's producer price index fell 8.2% in July from a year earlier, declining for the eighth month in a row and accelerating from June's 7.8% fall. The median forecast in a survey of 13 economists was for June PPI to fall 8.2%.


Friday, People's Bank of China Vice Gov. Su Ning brushed aside concerns about inflation, citing first-half declines in consumer prices. "There is no inflation problem now," he said. Economists predict prices will start to rise again later this year and say Beijing will likely scrutinize the risks of wasteful investments and bad loans associated with the expansionary policies.

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