China's urban fixed-asset investment kept a stable growth of 25.6 percent in the first five months of this year to total 4.02 trillion yuan (US$582.6 billion), the National Bureau of Statistics said yesterday, and analysts said FAI is set to expand following the Sichuan earthquake.

The bureau said FAI accelerated 25.7 percent during the first four months and 25.9 percent through March.

The economic gauge may rise in the following months because of demand that will be created by reconstruction work following the May 12 earthquake in Sichuan Province, analysts said.

The central government has allocated about 500 billion yuan for reconstruction in Sichuan, analysts said.

From January to May, spending by state-owned and state-controlled enterprises rose 18 percent to 1.6 trillion yuan. Investors from Hong Kong, Macau and Taiwan raised their spending by 14.1 percent to 198.4 billion yuan while foreign investment grew 16.7 percent to 243.5 billion yuan.

"The investment growth has been squeezed a bit by the tighter credit controls so far this year. But its pace may pick up because of reconstruction after the earthquake which devastated almost everything in some areas," said Li Maoyu, an analyst at Changjiang Securities Co.

The People's Bank of China has ordered lenders to set aside a record 17.5 percent as reserves earlier this month. The latest move to raise the reserve requirement ratio earlier this month was the fifth this year.

Shen Minggao, an Citigroup economist, said the year-to-date growth of urban FAI slowed "slightly but steadily."

"The fear of a profit squeeze due to rising costs, a strong currency and tightening policies scared away some overseas investors but not necessarily domestic investors," said Shen.

In the first five months, spending on property development grew strongly when it surged 31.9 percent to 951.9 billion yuan.

Investment in coal exploration and output rose 47 percent to 52.7 billion yuan while petroleum and natural gas spending climbed 17.1 percent to 62.3 billion yuan.

(Shanghai Daily June 18, 2008)