Shanghai's economy expanded 11.1 percent in 2005, the 14th straight year of double-digit growth.

The city's gross domestic product (GDP) rose to 914.4 billion yuan (US$113.17 million) last year, the Shanghai Statistics Bureau said yesterday, but the increased lagged the 13.6 percent growth rate posted in 2004.

The slowdown was primarily the result of cutbacks in the real estate market and in fixed-asset investment, analysts said.

Even with the lower growth, Shanghai's GDP spike still outpaced the figure for all of China, which reported a 9.9 percent increase in GDP to 18.2 trillion yuan.

Shanghai's manufacturing sector led the city economy's three major segments with the fastest growth last year, rising 12.1 percent to 447.59 billion yuan.

It was followed by the service industry, which increased 10.5 percent to 458.84 billion yuan. That sector now comprises 50.2 percent of the city's economy.

Primary industry dropped 9.7 percent to 7.97 billion yuan.

Shanghai's fixed-asset investment, including funding for factories, roads and power plants, rose last year but at a much slower pace. The investment grew 14.8 percent to 354.56 billion yuan in 2005, down 11 percentage points from a year earlier.

Economists attributed the decline in the overall growth rate to China's efforts to rein in excess investment, especially in industries suffering from supply surpluses.

"Real estate - a key part of Shanghai's economy - cooled off after the government implemented policies in the past two years to slow down an overheating market," said Zhang Jun, director of the China Center for Economic Studies at Fudan University, referring to a series of tax increases and a mortgage interest rate hike implemented across the country.

"That led to a cooling-off in the market for upstream products including steel and other construction materials, which constitute a big part of the city's industrial investment."

Real estate investment grew 6.1 percent to 124.69 billion yuan last year, down 24.3 percentage points from the previous year.

The city's statistics bureau also reported that industrial investment climbed 7.3 percent to 107.48 billion yuan last year after jumping 25.1 percent the year before.

(Shanghai Daily February 9, 2006)