Chinese Investment Surges, Countering Record Export Slump

Chinese Investment Surges, Countering Record Export Slump


June 11 (Bloomberg) -- China’s spending on factories, property and roads surged by the most in five years as the government’s 4 trillion yuan ($585 billion) stimulus package countered a record slump in exports.

Urban fixed-asset investment climbed 32.9 percent in the five months to the end of May from a year earlier, the statistics bureau said today in Beijing. Overseas shipments declined 26.4 percent last month from a year earlier, the customs bureau said.

Climbing property and auto sales, record new lending and growth in manufacturing are also signs that the stimulus spending announced in November is driving a recovery in the world’s third-biggest economy. Falling exports because of the global recession are the nation’s biggest challenge, the State Council said last month.

“The government’s stimulus package has spurred domestic demand to offset the negative impact from slumping exports,” said Lu Ting, a Bank of America Merrill Lynch economist based in Hong Kong. “There’s no problem in China achieving its 8 percent economic growth target for this year.”

The Shanghai Composite Index rose 0.3 percent as of the 11:30 a.m. local time break in trading, extending its gain this year to 55 percent. The yuan traded at 6.8340 against the dollar as of 12:27 p.m., from 6.8342 before the data were released.

Urban fixed-asset investment in the first five months was 5.35 trillion yuan. The increase in spending was faster than the 30.5 percent gain in the first four months and the 31 percent median estimate of 16 economists surveyed by Bloomberg News.

Private Investment

“It’s a very strong number,” said Tao Dong, Credit Suisse Group AG’s chief Asia economist in Hong Kong. “The continued acceleration seems to suggest that some private investment is coming back.”

Property investment is picking up, rising 6.8 percent in the first five months, compared with a 4.9 percent increase through April, the statistics bureau said yesterday.

That gain “surprised everyone,” said economist Lu.

The number of new investment projects jumped by 47 percent in the first five months to 123,878, the bureau said today. Planned spending on those projects was 5.33 trillion yuan, almost double the amount a year earlier.

The slide in exports was the biggest since data began in 1995 and worse than economists’ median estimate of a 23 percent decline. TCL Corp., China’s biggest maker of consumer electronics, posted a 97 percent plunge in first-quarter profit as exports of televisions and mobile phones fell.

Exports ‘Bottom’

“Exports may be at the bottom,” said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. “A sustained recovery is unlikely until demand from major economies picks up around the middle of this year.”

Seasonally adjusted, the decline was a smaller 22.8 percent, and month-on-month shipments rose 0.2 percent, the customs bureau said. China’s export orders index advanced to 50.1 in May, marking the first expansion in 11 months, a government-backed manufacturing index showed previously.

China’s economy expanded 6.1 percent in the first quarter from a year earlier, the weakest gain in almost a decade. Full- year growth may be 7.5 percent, according to a Bloomberg News survey of economists last month.

Since the stimulus was announced in November, the nation has built 20,000 kilometers (12,430 miles) of rural roads, 445 kilometers of highway and 100,000 square meters (1.08 million square feet) of airport buildings, the National Development and Reform Commission said on May 21. China is also building 5.2 million low-rent homes over three years.

China’s infrastructure drive is helping China Railway Group Ltd., the nation’s biggest construction company by assets. On June 3, the company said it won a contract to build a passenger line between the northeastern cities of Panjin and Yingkou. Railway investment more than doubled in the first five months from a year earlier, the statistics bureau said today.

BLOOMBERG