Total fixed asset investment, a key gauge of domestic demand, was 615.5 billion yuan (US$74.2 billion) during the January-March period, the bureau said in a statement.

Of that, 220.6 billion yuan (US$26.6 billion) was spent on infrastructure projects, a year-on-year increase of 28 percent.

Spending on renovation and upgrades rose year-on-year by 36.7 percent to 80.7 billion yuan (US$9.7 billion), while that on real estate development rose year-on-year by 34.9 percent to 128.5 billion yuan (US$15.5 billion).

Wang Zhao, a researcher at the Development Research Centre under the State Council, said the fast growth in fixed assets investment was mainly a result of the country's pro-active fiscal policy.

The increasingly vigorous private investment and the inflow of foreign direct investment also contributed to the growth, he said.

Zhang Xueying, a senior economist with the State Information Centre, said the fixed asset investment will continue to grow at a higher rate in the remaining months of this year, although the outbreak of the severe acute respiratory syndrome (SARS) will surely have some negative effect on the fixed asset investment.

"The fact that the country's stocks market dropped during the past several days was a clear indication that the epidemic has begun to affect people's investment confidence," he said.

However, the negative impact will be minimal, Zhang said.

Niu Li, another economist with the information centre, said global economic development this year could remain the same as last year.

This will be beneficial to the country's economic development, he said.

A report from the Chinese Academy of Social Sciences said the Chinese economy is likely to grow by 8.6 percent this year.

The faster economic development will lay solid foundations for the growth of fixed assets investment, Niu said.

The improvements in enterprises' economic efficiency since the beginning of last year due to the rise of oil prices and the accelerated pace of industrial output and export provided strong support for companies to invest, he said.

The reform on administrative approval system in the past years also helped improve the market environment, which is helpful for fixed asset investment.

However, a number of factors such as the difficulties for small and medium-sized companies to obtain bank loans will continue to have a negative effect on the country's fixed asset investment.

(China Daily April 23, 2003)