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Chinese investment surges, offsetting export fall.

Chinese investment surged by more than expected in May on the back of government pump-priming and a recovery in the property sector, helping to offset persistent weakness in demand for its exports.

The strong investment figures provided fresh evidence that the world's third-largest economy is leading others on the path to recovery with its fiscal firepower,while the greater-than-expected fall in exports underlines its continuing vulnerability to events outside its control. Investment accounts for a much greater portion of economic growth than net exports,meaning strength there is likely to help offset weakness in external demand.

Investment in urban areas in fixed assets such as apartment buildings and roads rose 32.9 percent in the first five months from a year earlier,compared with 30.5 percent in the first four months, the National Bureau of Statistics reported.

Economists said that translated into a 40 percent leap in May alone. Adjusted for inflation,the increase was even greater because Chinese prices have been falling for several months. "I think this is a welcome sign of momentum building in the Chinese economy,and it's good for the global outlook," said David Cohen with Action Economics in Singapore. Underpinned by optimism over the Chinese economy,commodity-related stocks in Asia rose for a third straight day while oil prices extended gains to seven-month highs.

Economists attributed the strength in investment to the government's 4 trillion yuan ($585 billion) economic stimulus plan,announced in November, and an associated record surge in credit growth from the state-dominated banking system.

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Publication:Saudi Economic Survey
Article Type:Brief article
Geographic Code:9CHIN
Date:Jun 24, 2009
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