SHANGHAI stocks dropped this morning as downside risks to the economy have increased despite government pledges to give priority to stimulating growth.

The benchmark Shanghai Composite Index lost 0.31 percent, or 7.39 points, to 2,356.05. Turnover stood at 42.5 billion yuan (US$6.7 billion) in the morning session.

The country needs to introduce proactive fiscal policies to expand demand and create a favorable environment for maintaining steady and relatively fast economic growth, the government said on its website last night.

The government's second pledge in four days spurred speculation that more stimulus measures are on the way. Premier Wen Jiabao said over the weekend that the government would give priority to economic growth.

Railway related stocks surged on the government's intention to accelerate construction of railways, as well as environmental protection and infrastructure projects.

Taiyuan Heavy Industry Co, a producer of railway parts, gained 5.1 percent to 6.23 yuan. China Railway Erju Co rose 4.7 percent to 6.71 yuan.

Cement producers also advanced on the news. Anhui Conch Cement Co, the country's biggest cement producer, rose 1.1 percent to 16.87 yuan. Ningxia Building Materials climbed 4.7 percent to 11.80 yuan.

Source:shanghaidaily