Fixed asset investment, a key gauge of domestic demand, amounted to 1,057.8 billion yuan (US$127.4 billion) during the January-May period, a year-on-year increase of 31.7 per cent, the bureau said in a statement.

The growth rate was 1.2 percentage points faster than for the first four months of 2003, it said.

Of the total investment, 535.3 billion yuan (US$64.5 billion) was spent on infrastructure projects, a year-on-year increase of 28.7 per cent.

Spending on renovations and upgrades rose a year-on-year 37 per cent to 199.4 billion yuan (US$24 billion), while investment in real estate development rose a year-on-year 32.9 per cent to 280.1 billion yuan (US$33.7 billion).

Wang Zhao, a researcher with the Development Research Centre under the State Council, said the fast growth in fixed asset investment suggests market factors have begun to impact on economic development.

"Private companies have become an important propeller for fixed asset investment," he said.

Wang said fixed asset investment will continue to grow at a higher rate in the remaining months of this year.

The SARS outbreak would not have a large negative impact on investment, although it would have some effect on domestic spending, especially in the tourism and catering industries, he said.

"The impact of SARS on the whole economy would be less than 1 percentage point," Wang said.

Jemal-ud-din Kassum, vice-president for East Asia and the Pacific with the World Bank, said SARS is a temporary shock, despite the uncertainty over the extent of the crisis.

China is still generally expected to grow at robust rates, he said.

Zhang Xueying, a senior economist with the State Information Centre, said China's economy is capable of maintaining a 7 per cent growth rate this year.

Faster economic development will lay solid foundations for the growth of fixed asset investment, he said.

However, a number of factors, such as the difficulties small and medium-sized companies face in securing bank loans and relatively low prices since the beginning of last year, will continue to harm the country's fixed asset investments.

(China Daily June 18, 2003)