Fixed-asset investment (FAI) growth in China is growing fast. Figures for January to April show an impressive 30.5% increase on last year. Investments in property, plants and equipment make up FAI and, more importantly, comprise roughly 45% of China’s GDP.
The government’s 4 trillion yuan fiscal stimulus package and expanding bank credit is working better than many analysts expected. And a recent report from investment bank Société Générale offers an optimistic forecast in the chart below.
The graph shows China’s investment growth in fixed-assets (red line) from Sept 2005 to date. It adds the SocGen forecast for the rest of 2009. You can see the upward spike (circled) in the first quarter of this year.
Strong fixed-asset investment growth is a good sign for Chinese GDP
Source: SG Economic Research/CEIC
Majority of the investment growth is in newly-started projects, focused on boosting China’s economy over the medium term. The four-month period saw 86,420 new projects, up 45% from a year earlier.
Total FAI surged by a remarkable 91% to 3.68 trillion yuan. In line with the priorities of the stimulus package, railways have seen a 95% increase over the past year and non-metal mineral mining is up 60%.
Indeed, these figures are impressive. As China’s fixed-asset investment increases, it could shape up to hit the 8% growth for 2009 as officially forecasted by the Chinese government. It’s early days yet, but continued positive newsflow from China may help it regain its popularity with investors.
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