China's urban fixed-asset investment rose 27.2 percent year-on-year during the first seven months of this year but recorded a slight drop in July over the previous month, the National Bureau of Statistics said yesterday.

The investment, which covers spending on things such as roads, power plants and houses, stood at 3.46 trillion yuan (US$427.1 billion) during the January-July period.

In July, urban fixed-asset investment rose 27.7 per cent year-on-year, the bureau said, but it fell 1.1 percentage points from June, as the government's macro-control measures exerted an impact on investment, said Zhou Jingtong, a senior economist with the State Information Centre.

China has taken strict measures including land control and lending limits on banks to rein in investment.

"Investment will continue to see a mild slowdown during the rest of this year," Zhou said.

With investment and industrial production losing steam, the country's economic growth will slow down, he said.

Wang Zhao, a senior researcher with the State Council Development Research Centre, agreed that the country's economy will enter a period of stable growth but asserted that fixed-asset investment would continue to grow at a fast rate.

The change in consumption patterns, under which expenditure has "moved up" from small-ticket items such as TVs and washing machines to far-more-expensive houses and cars, will lead to a strong demand for energy, electricity, raw materials and other products, he said.

"This will fuel a large amount of investment."

Foreign companies' increasing enthusiasm for the Chinese market has also created a large investment demand, he said.

Zhuang Jian, a senior economist with the Asian Development Bank, said July's investment showed no signs of an obvious decline.

This will ease the worries of some economists who believe that the country's economic growth may decline too much in the remaining months of this year, he said.

Fixed-asset investment will continue to be a leading factor in China's economic development, he said.

The Chinese economy, fuelled by the 25.4 per cent growth in fixed-asset investment, rose 9.5 per cent year-on-year during the first half of this year.

But from the long-term point of view, the government needs to prevent fixed-asset investment from rising too fast, Zhuang said.

The government should focus on stimulating consumption to maintain sustainable development, he said, adding that fast growth in fixed investment but weak demand would result in a production oversupply, which would have a negative impact on the economy.