China's fixed asset investment grew 26.4 per cent year-on-year during the first five months of the year, the National Bureau of Statistics said yesterday.

During the period, fixed asset investment stood at 1.97 trillion yuan (US$237.6 billion), of which real estate investment was 464.4 billion yuan (US$56 billion) - an increase of 24.3 per cent.

Zhou Jingtong, a senior economist with the State Information Centre, said fixed investment growth remained strong.

The relatively fast investment growth was partly due to the low base a year earlier when investment growth slipped to 18.3 per cent after hitting a peak of 53 per cent in the first two months of 2004, he said.

Increasing investment in bottle-neck sectors such as coal mining, electricity and transportation also contributed to the faster growth, he said.

"But higher growth figures do not mean fixed asset investment has rebounded," he said.

More investment in bottleneck sectors is what the government wants to see and is helpful for the country's future economic development, he said.

However, Zhou added, the government should not relax its present macro-control measures.

Since mid-2003, China has taken a raft of measures including strict land management and lending limits on banks to rein in investment.

The People's Bank of China, the central bank, even raised interest rates for the first time in nearly a decade, increasing the benchmark lending rate by 0.27 percentage points to 5.58 per cent last October.

In its latest move, the government took eight measures including the introduction of specific tax policies to increase control over the real estate sector.

But Zhou warned the government should be alert to a potential rebound in fixed asset investment growth.

Zhuang Jian, a senior economist with the Asian Development Bank, said there are some early signs that fixed asset investment might have rebounded.

"But we still need to wait one or two months before judging whether the government needs to carry out new tightening measures," he said.

Wang Zhao, a senior researcher with the State Council Development Research Centre, said the present investment situation was good, suggesting the Chinese economy has entered a new period of development.

(China Daily June 17, 2005)