China new project investment shrank in '06

Beijing, Jan 29: China saw less investment in new projects in2006 than in 2005, government sources said on Monday, marking a sharpturnaround from the rapid expansion in such spending seen in the firstfew months of the year.

China carried out a slew of measures last year to rein ininvestment growth, including two interest rate rises and a strictreview of new projects to ensure that they were in line withenvironmental, work safety and other standards.

Officials with the National Bureau of Statistics told Reuters thatnegative annual growth in spending on new projects in December wasenough to push that for the whole year below zero.

They did not provide specific figures.

That growth stood at 3.7 percent in the first 11 months of 2006, down from a peak of 42 percent in the first quarter.

Spending on new projects expanded 32.4 percent in 2005.

The negative full-year growth in spending on new projects comparedwith a 24 percent increase in overall investment. The statistics bureauusually provides detailed breakdowns of the monthly figures, but it hasnot yet done so for December or 2006.

The officials cautioned that China's economy could see acorrection should investment in new projects continue to shrink, givenits heavy reliance on fixed-asset investment for growth.

However, analysts said that the figures could be under-estimatinginvestment in new projects, as local governments sought to avoidcentral government scrutiny by under-reporting the amount being spentin their jurisdictions.

China's gross domestic product grew 10.7 percent in 2006, thefastest rate in 11 years. Officials have said that they seek for thatpace to slow this year.

Reuters>