Chinese Investment Climbs 30.5% on Stimulus Plan And Surging Loans

BEIJING, May 14 -- Sources reported that China’s urban fixed-asset investment climbed 30.5% in the first four months from a year earlier as the government pumped money into building railways, oil pipelines and low-cost housing.

    According to the report, the gain compared with a 28.6% increase in the first three months and the 29.1% median estimate of 16 economists. The statistics bureau released the figure in Beijing.

    Wen Jiabao’s premier RMB 4 trillion stimulus packages is sparking signs of a government led recovery in the world’s third-biggest economy after exports collapsed. Government plans to ease capital requirements for borrowing to invest in fixed assets in transportation, property, coal and information technology may spur more private spending.

    Sun Mingchun, chief China economist at Nomura Holdings Inc in Hong Kong, said “Fixed-asset investment is the most important driver for economic growth this year. He said that gross domestic product to expand more quickly each quarter this year, jumping to a 9.8% gain in the final three months from a year earlier.

    The State Council announced plans to lower capital requirements for some fixed-asset investment on April 29th without saying how big the cut would be.

    1. New Stimulus Package’

    Lu Zhengwei, Shanghai based chief economist at Industrial Bank Co, said lowering the capital ratio by an average of 6 percentage points could save local governments and private investors more than RMB 1 trillion a year. He said that “That would almost equal a new stimulus package.”

    China’s central government has allocated RMB 420 billion for infrastructure projects and earthquake reconstruction from the fourth quarter of last year. That is more than a third of its commitment under the stimulus plan announced in November and running through next year.

    Central bank data showed new loans in the four months through April topped the government’s targeted minimum of RMB 5 trillion for 2009 as banks supported the stimulus plan.

    Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong, said “The current rapid investment growth may not sustain in the second half of this year as new projects and bank loans decelerate.”

    2. Steel, Petrochemicals, Autos

    The State Council said China will give RMB 20 billion this year in interest-rate subsidies on bank loans to help steel, petrochemical and automobile companies upgrade technology.

    Pending investments include a plan by China Petroleum & Chemical Corp and Kuwait’s national oil company to build a USD 9 billion refining complex in Guangdong province. Volkswagen AG and partner China FAW Group Corp plan to spend EUR 550 million expanding a factory in Chengdu.

    (Source: Bloomberg)