China's economy is continuing to expand rapidly thanks to robust export growth and rising consumption, despite slowed fixed asset investment,

"Declining major economic indicators show the overheated economy is coming under control," Li Xiaochao, a spokesman of the National Bureau of Statistics, said last month.

Latest statistics, released last month, indicate that the growth of fixed assets investment in urban areas was 4.5 percentage points lower the same period last year.

Breakneck investment growth in the first half of this year had given rise to fears that the Chinese economy might be in danger of overheating.

Chinese authorities therefore tightened monetary and credit supply amid a slew of other macroeconomic control measures.

Urban fixed-asset investment growth slowed to 26.8 percent year-on-year in the first 10 months this year, down from 31.3 percent for the first half of this year.

In monthly terms, investment growth has dropped sharply from above 30 percent a few months ago to about 17 percent in October.

China's macro control policies are gradually taking effect and macroeconomic risks have been reduced, noted Liu Mingkang, chairman of China Banking Regulatory Commission, at a recent financial forum.

"Clearly, investment is slowing," said Qu Hongbin, chief economist of HSBC (Asia), "Now the question is to what extent will it be slowed."

Though not fully convinced by the monthly fall of investment growth, Qu believed that other data like slowing growth of industrial added value and imports could support the view that October was a turning point in investment growth.

Growth of industrial added value and imports both dropped to 14.7 percent in October from 16.1 percent and 22 percent respectively in September.

"We are not worrying about a slowdown of the whole economy," said Qu. "This is because consumption is rising to sustain China's relatively rapid economic growth."

China's retail sales jumped 14.3 percent from the previous year to 699.8 billion yuan (US$89.1 billion) in October, the fastest pace in almost two years.

The growth of retail sales for the first half of the year was 13.3 percent. It rose to 13.7 percent in July, 13.8 percent in August and 13.9 percent in September. Retail sales for the first 10 months stood at 6.2089 trillion yuan, up 13.6 percent on the previous year.

The pick-up of domestic consumption is closely related to fast income growth and low inflation.

Per capita disposable incomes in towns and cities increased 10 percent in the first nine months from the same period last year, and rural incomes jumped 11.4 percent.

Meanwhile, China's consumer price index, the key inflation gauge, increased only 1.4 percent in October, lower than the expected 1.6 percent.

"The government's policy to boost consumption will show better results next year," said Yao Jingyuan, chief economist of the National Bureau of Statistics, at a recent business forum.

The surge in China's trade surplus is more surprising.

October witnessed a monthly trade surplus record of US$23.8 billion. The country's foreign trade in the first 10 months rose 24.1 percent year-on-year to hit US$1.425 trillion, surpassing the volume for the whole of 2005.

And the Commerce Ministry forecast that the country's overall trade surplus will soar to a record US$150 billion this year, nearly 50 percent above the 2005 level.

As a global manufacturing centre, China is bound to reap profits from processing trade. But the country is definitely not in pursuit of a trade surplus. China will step up reforms of its economy to counter politically contentious trade imbalances, President Hu Jintao told world business leaders attending an economic conference in Hanoi last month.

(China Daily December 5, 2006)