China new project investment shrank in '06-sources

BEIJING, Jan 29 (Reuters) China saw less investment in new projects in 2006 than in 2005, government sources said on Monday, marking a sharp turnaround from the rapid expansion in such spending seen in the first few months of the year.

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

Officials with the National Bureau of Statistics told Reuters that negative annual growth in spending on new projects in December was enough 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 compared with a 24 percent increase in overall investment. The statistics bureau usually provides detailed breakdowns of the monthly figures, but it has not yet done so for December or 2006.

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

However, analysts said that the figures could be under-estimating investment in new projects, as local governments sought to avoid central government scrutiny by under-reporting the amount being spent in their jurisdictions.

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

REUTERS AKJ RK1101