China's Focus on Boosting Domestic Demand Sees Success

May 12, 2009
Urban fixed asset investment, an indicator of the government's progress in lifting growth by funding infrastructure projects, was up 30.5% in the first four months of 2009.

With investment in infrastructure rising as exports fell, China's efforts to boost domestic demand to fight the global financial crisis showed strong signs of success on May 12. Analysts said the impact of a four-trillion-yuan (US$580 billion) package unveiled in November to stimulate demand at home had started to be felt as China moves towards an investment-heavy growth model.

Exports fell 22.6% in April to 91.9 billion yuan from a year earlier in the sixth straight monthly decline, according to figures from the customs bureau.

But urban fixed asset investment, an indicator of the government's progress in lifting growth by funding infrastructure projects, was up 30.5% in the first four months of 2009, the National Bureau of Statistics said. According to research firm Moody's, this represented the highest rate of growth since July 2006.

"This very obviously shows that domestic demand is quite good because of the fiscal stimulus package, and external demand is still too weak," said Xu Jian, a Beijing-based economist at China International Capital Cooperation.

Figures released by the statistics bureau showed that funds for fixed asset spending in China have come overwhelmingly from domestic sources so far in 2009.

Investments by domestic enterprises in the first four months of the year were up 34.6%, while investment by foreign businesses in the same period was down 1.2%.

According to the customs data, China's exports in April rose 6.9% compared to March, and imports increased 15.1%.

The statistics bureau also said that spending on new projects increased by 90.7% in the first four months of the year. This suggested "that aided by the fiscal stimulus, total fixed investment is still likely to rise solidly in coming months," said Qian Wang of JP Morgan.

The customs bureau highlighted a slight improvement in the situation, saying the drop in trade in April had slowed by 1.9 percentage points compared to that of the first three months of the year.

Copyright Agence France-Presse, 2009

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