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Fixed asset investment records slower growth
【2018-01-22】

China's fixed-asset investments grew more than expected in 2017, but recorded the slowest annual growth pace since 2000 as authorities stepped up efforts to rein in local government debt and financial leverage continued to fall, official data showed on Thursday.

By the end of last year, the country's fixed-asset investment reached 63.17 trillion yuan ($9.83 trillion), up 7.2 percent year-on-year, the lowest rate since 2000, the National Bureau of Statistics said at a news briefing. The growth rate was down from 8.1 percent in 2016 and 10 percent in 2015.

Investments in the private sector, which was 60.4 percent of the total, increased by 6 percent from a year earlier, and it was 2.8 percentage points higher than that in 2016, the NBS said.

Shi Zhengwen, director of the Center for Research in Fiscal and Tax Law at China University of Political Science and Law, said that tightened controls on local government debt has, to some extent, cooled down the investment speed.

According to the official data, local government-led investment projects totaled 60.81 trillion yuan, or more than 96 percent of the total investments, up 7.7 percent from a year earlier, but down from 7.8 percent in 2016.

The Ministry of Finance issued the annual data of local government debt on Wednesday. After raising 4.36 trillion yuan, the local government debt balance stood at 16.47 trillion yuan by the end of 2017, below the government-targeted ceiling of 18.82 trillion yuan. Among that, 36.5 percent was from new debt issuance, while the rest was from the debt-for-bond swap program, the ministry said.

It was the first time in history that the ministry disclosed annual data on local government debt, aiming to improve transparency of the debt level for further supervision.

Meanwhile, the country's financial regulators have issued new rules to tighten supervision on interbank, off-balance sheet and asset management businesses, to further decrease financial leverage, which has also slowed credit expansion and influenced investment, said economists.

"The debt problem witnessed encouraging progress in 2017, with the debt level stabilizing and the corporate liability ratio declining," said Zhu Haibin, chief China economist with JPMorgan Chase & Co.

The economist expects fiscal discipline to be further strengthened this year, especially for public-private partnership projects and the use of industry funds.

The country issued a new budget law in 2014 that forbids raising funds via local government financing vehicles. Instead, it allows the same only through bond issuances.

On Thursday, the China Insurance Regulatory Commission and the Ministry of Finance jointly issued a guidance to regulate local governments' fundraising activities through insurance products, stressing that insurance capital cannot be used as the local government financing vehicle to increase local debt-a measure to curb the expansion of "invisible" and illegal debt.

But the insurance funds will be encouraged to be invested through legal channels-purchasing local government bonds to support key investment projects, the guidance said.