Wednesday, June 20, 2007

China Factory Investment

According to this Bloomberg article:

China's factory and property investment surged, fueling speculation that an interest-rate increase is imminent after exports, industrial production and inflation accelerated. Fixed-asset investment in urban areas rose 25.9 percent in the first five months from a year earlier to 3.2 trillion yuan ($420 billion), the statistics bureau said in Beijing today. The increase was 25.5 percent in the first four months. The final indicator for May underscores the government's failure to cool an economy that grew 11.1 percent in the first quarter.

China raised borrowing costs and deposit rates on May 18, pushing the benchmark one-year lending rate to 6.57 percent and the deposit rate to 3.06 percent, still less than the inflation rate. The central bank has also ordered lenders to set aside more reserves five times this year.

nflation accelerated to 3.4 percent in May, the highest rate since February 2005. Industrial production jumped 18.1 percent. Exports surged 28.7 percent and the trade surplus swelled 73 percent to $22.5 billion, pumping the financial system full of cash.

The number of new investment projects in the first five months was 74,701, an increase of 7,282 from a year earlier, the statistics bureau said. Investment grew 30.3 percent in the first five months of last year and 24.5 percent in all of 2006.

Spending by industries producing non-ferrous metals jumped 40.7 percent in the first five months from a year earlier, while real estate investment climbed 27.5 percent.

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