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China's January-to-August state investment climbed

China's government increased spending on housing, roads and other projects by almost a quarter in the first eight months of 2002 as it tried to keep economic growth above 7 percent.

Fixed-asset investment, which includes spending by the government and state companies and capital investments in state companies,rose 24.2 percent from a year earlier to 1.65 trillion yuan (US$199.3 billion), the National Bureau of Statistics said. That's about twice the rate of growth for all of last year.

The government is ramping up spending to counter a slowdown in consumer demand as unemployment rises. State spending helped the economy grow 8 percent in the second quarter from a year earlier, the fastest in Asia -- a pace needed to absorb the 25.5 million workers fired from state companies between 1998 and last year.

"China is building out vast quantities of communications and transport infrastructure," said Michael Kurtz, an economist at Bear Sterns Asia Ltd in Hong Kong. "They are creating a foundation for growth over the next 20 to 30 years."

China is issuing 592.9 billion yuan in treasury bonds this year to fund spending, plus 150 billion yuan in special bonds for public works, Finance Minister Xiang Huaicheng said in March. The government expects its budget deficit to widen 19 percent this year to 309.8 billion yuan.

The government may rein in spending later this year. Premier Zhu Rongji said yesterday that wasteful government spending may cause the government to exceed its deficit limit, China Daily reported. Surging exports and foreign investment may reduce the need for government stimulus, Kurtz said. Exports surged 25 percent in August from a year earlier, and foreign investment surged by a quarter in the first eight months of the year.

Investment in real estate rose 30 percent in the first eight months of the year, today's report showed. Spending on roads, airports and other infrastructure projects climbed 31 percent.
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