Fixed-asset investment in urban areas rose to 812.1 billion yuan ($115 billion) year on year, according to the latest data from the Chinese statistics bureau. The rate was also up slightly from the 23.4 percent pace achieved in January and February 2007.
The worst snowstorms in half a century failed to prevent a 33 percent jump in spending on real-estate development. China may now move more strongly to allow appreciation of the yuan, to raise interest rates and to increase bank reserve requirements after inflation in February accelerated to an 11-year high.
The yuan rose today to its highest level since the fixed exchange rate peg was ended in 2005. It traded at 7.0864 versus the dollar as of 3:42 p.m. in Shanghai up from 7.0900 yesterday. At the same time the CSI 300 Index of stocks fell 1 percent for the sharpest weekly decline since the index was introduced in April 2005, amidst growing concern that the government is about to raise interest rates. The People's Bank of China lifted borrowing costs six times in 2007 and has pushed banks' reserve requirements to 15 percent, the highest ever. The key one-year lending rate is currently at 7.47 percent.
The rate of investment compares with the 25.8 percent increase for the whole of 2007, but this years economic statistics for January and February this year have been distorted by the recent blizzards, making it harder to evaluate the effects of what the government terms its "tight" monetary policy.
Inflation shot up to 8.7 percent in February. Producer prices, the cost of goods as they leave the factory, also rose at the fastest pace in three years. Retail sales climbed the most in nine years, partly on rising prices.
Weaker export growth illustrated the threat that slowing global economic growth may represent for China. Overseas shipments rose last month at the slowest arte in five years, cutting the trade surplus, as demand in the United States waned. Money-supply growth also slowed, while industrial production expanded in the first two months by the least in a year.
The acceleration in property investment - up by 32.9%, an increase from the 30.2% pace for the whole of 2007 - even after the government tightened land-use rules, raised mortgage costs and increased down payments is bound to represent a cause for concern.
Non-metal minerals investment surged 61 percent in the first two months from a year earlier, coal jumped 31 percent, and oil and natural gas rose 9.8 percent. Spending on electricity production fell 3.7 percent.
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