China's spending on factories and real estate increased at a slower pace, adding to weaker growth in industrial output, trade and inflation in signaling that a slowdown is deepening in the world's fourth-biggest economy.

Fixed-asset investment in urban areas rose 27.2 percent in the first 10 months from a year earlier to 11.3 trillion yuan ($1.7 trillion), the statistics bureau said today. That was less than the 27.6 percent gain through September and the 27.4 percent estimate of 17 economists surveyed by Bloomberg News.

China's State Council announced $586 billion of spending on housing and infrastructure on Nov. 9 as the financial crisis and a property slump undermine growth and a world recession looms. Industrial production expanded by the least in seven years last month, the government said yesterday.

``This confirms that China's economic growth has deteriorated further,'' said Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong. ``That's why the government needs the stimulus to manage the economy. Without it, there could be a sharp slowdown.''

The yuan traded at 6.8313 against the dollar as of 10:13 a.m. in Beijing from 6.8300 immediately before the announcement.

The number of new investment projects rose by 16,997 in the first 10 months from a year earlier to 208,083, the statistics bureau said. Planned spending on them increased 3.2 percent to 6.9 trillion yuan.

China's economy, the world's fourth largest, expanded 9 percent in the third quarter from a year earlier, the slowest pace since 2003, as the global crisis cut export demand. Next year's expansion may be 7.5 percent, the weakest in almost two decades, according to UBS AG.

Spending Plan

The nation's spending plan through 2010 spans housing, rural development, railroads, power grids and rebuilding after May's earthquake in Sichuan province. It also allows tax deductions for purchases of machinery to stimulate investment.

On Nov. 12, the government announced the investment of at least $27 billion in six energy projects, including a natural gas link and nuclear power plants.

The nation will begin constructing 10 nuclear power reactors with a capacity of 1,000 megawatts each in the eastern provinces of Fujian, Zhejiang and Guangdong, the National Development and Reform Commission said on the same day.

PetroChina Co., the nation's largest oil and gas producer, will start building a 10 million-metric-ton-a-year refinery in Chengdu in Sichuan province, the company said.

Signs of Slowdown

Inflation eased to the slowest pace in 17 months in October, money supply expanded by the least in three years, and import, export and retail-sales growth cooled, this week's figures showed. Export orders fell last month to the lowest since 2005, a government survey showed previously.

``The slowdown in investment was led by manufacturing companies in export-related industries,'' said Paul Tang, chief economist at Bank of East Asia Ltd. in Hong Kong. ``As exports continue to moderate, it will be difficult for investment to recover as the government's economic stimulus will take time to materialize.''

Spending on real-estate development cooled, rising 24.6 percent in the first 10 months from a year earlier after gaining 26.5 percent through September, the statistics bureau said today.

Prices and sales are falling in major cities and construction contracted in September by the most since the 1990s, according to Macquarie Securities Ltd.

Besides spending and cuts in export taxes, the government has pledged a ``relatively loose'' monetary policy. The central bank has reduced interest rates three times from September and eliminated quotas that limited lending by banks. The key one- year lending rate stands at 6.66 percent.

In the first half, the contribution of consumption and investment to economic growth rose by 10.5 and 6.l percentage points to 50.2 percent and 44.9 percent respectively.

Net exports accounted for 4.9 percent, down 16.6 percentage points from 2007, according to central bank figures.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

(Bloomberg, Nov 14, 2008)