Binging on fixed-asset investment no way to maintain economic growth

By Wang Yong | May 6, 2009, Wednesday |

Print Edition

THE latest issue of Outlook magazine warns China against an onrush of fixed-asset investment in its effort to maintain economic growth.

"Our effort to maintain economic growth risks worsening into a competition of investment," said Jian Jun, author of the article, titled "Don't equate maintaining growth with investment competition," published in the latest issue of Outlook, a magazine of Xinhua News Agency.

The author said Jiangsu Province's GDP grew 10.2 percent in the first quarter (over the same period last year), far higher than Shanghai's 3.1 percent and Zhejiang Province's 3.4 percent. This was because Jiangsu's investment in urban fixed assets in the first quarter soared 23.6 percent, in contrast to Shanghai's 1.7 percent and Zhejiang's 10.7 percent.

An analysis of Jiangsu's official data concludes that most of the fixed-asset investment in the province was not squandered. Railways, high-tech and new, alternative energy received much of the investment. Indeed, these projects will lay the foundation for future growth.

The thing is, 90 percent of Jiangsu's economy depends on foreign trade. Its exports slid by 24.5 percent in the first quarter and its overall import and export volume plummeted by 27.9 percent.

A fixed-asset investment binge may help the province maintain economic growth temporarily, but in the long run, it must fix its export business - either reducing reliance on exports, or recovering or even expanding the overseas market.

Nationwide, fixed-asset investment was also the engine of economic growth in the first quarter.

While an investment binge is not necessarily bad per se, a waste of money in unnecessary investment is.

So far there are not figures about this kind of waste, but in our daily life, we often see workers digging roads after roads, replacing old stones in good shape with new ones - in the name of investment.

It isn't that difficult to find waste in an era marked by construction sites.

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Binging on fixed-asset investment no way to maintain economic growth

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