From "Fixed Asset Investment" by Daniel Melser, Senior Economist, Moody’s Economy.com, October 20
Fixed asset investment … has remained high despite weakness evident in the export sector, and a crash in the property market and share prices … Much of investment spending is government-led and directed toward building hard infrastructure … There are anecdotal accounts of much weaker economic activity in the Pearl River Delta [but] there is little sign of an investment downturn. Nevertheless, authorities are worried about the health of this sector and have cut interest rates … But don’t expect interest rate cuts to be a panacea; much investment is funded by retained earnings rather than borrowing … For the [fourth quarter] the investment sector [and] household spending … will keep the economy moving forward. There is considerable weakness in the massive export sector but … [authorities] will be hoping that business spending holds up and that consumer expenditure continues to accelerate.
From "Comments on 3Q08 Economic Data" by Jing Ulrich, Managing Director & Chairman, China Equities, J.P. Morgan, October 20
September data showed China’s export growth picking up to 21.5% y-o-y and the monthly trade balance widening to a record $29.3 billion [on] declining commodity prices … In the remainder of the year we expect to see some weakening in export growth … China’s trade surplus for the first three quarters of the year totaled US$180.9 billion, a decrease of 2.6% from a year earlier. The trade contribution to China’s growth is expected to narrow and potentially turn negative this year and in 2009, compared to 2.6 percentage points in 2007 … Investments in real estate constitute the second-largest component in FAI after manufacturing, and directly contributed approximately 1 percentage point to China’s 2007 GDP growth.
From "China Question of the Week – Is Capital Fleeing China?" by Wang Tao, Economist, UBS Securities, October 16
China added US$21.4 billion to its official FX reserves in September, less than the combined trade surplus and foreign direct investment. Even after taking into account estimated losses from Euro asset holdings … the negative "unexplained" capital flows [are] sizable. This apparent outflow was then linked to the ongoing global financial crisis, leading many to raise alarm about further capital outflows and implications for the currency … The available evidence [does not suggest] capital outflow. Capital inflows have slowed as expectations of RMB appreciation dropped, but … [September’s] smaller-than-expected reserve accumulation reflected other factors. The most notable is the implementation of the new foreign exchange management regulations that were issued in August 2008.