China's fixed asset investment growth slowed further in May compared with April, owing in large part to the central government's efforts to cool the economy. Fixed asset investment came in at 439 billion yuan (US$52.9 billion) for May, a year-on-year increase of 18.3 percent, the National Bureau of Statistics said Monday. The growth rate was 16.4 percentage points lower than in April.

For the first five months, fixed asset investment rose 34.8 percent year-on-year, also slowing from the 42.8 percent growth of the first four months, it said.

Economists are worried about the impact on overall economic growth of fixed-asset investment, which showed a blistering rise of 53 percent year-on-year during the first two months.

"Excessive growth in some sectors and regions was putting a strain on transportation and power suppliers and driving up the prices of raw materials," said Fan Gang, director of the National Economic Research Institute.

Overheating in industries--including steel, aluminum, cement and automobiles--could have a serious impact on the economy, he said.

Since the second half of last year, a raft of measures has been taken to cool the economy, including raising bank reserve requirements three times, curbing unnecessary fixed asset investment projects and issuing tighter restrictions on new projects in over-invested industries such as real estate and steel.

"Those measures are working," said Zhang Liqun, a senior researcher with the State Council Development Research Center.

Economic data released so far for May has shown factory output and money supply rising at their slowest annual pace in several months, increasing hopes that China is on course for a soft economic landing.

Foreign direct investment, another important economic figure, climbed 11.3 percent year-on-year in the first five months, also at a slower pace.

Premier Wen Jiabao, on an inspection tour of central China's Hubei Province on Friday, was reportedly satisfied with the overall economic situation.

"The overly rapid growth of investment has been reined in, the increase of money supply and credit has slowed, the costs of production have started to drop, and the destabilizing, unhealthy factors in economic operations have been checked to some extent," Wen said.

Meanwhile, China's national economy has maintained rapid growth, with both agriculture and industry further strengthened and the people's livelihood further improved, he said.

Foreign trade has witnessed a constant rise and revenues there increased markedly.

"The figures show that the macroeconomic control policies and measures adopted by the central authorities are timely, correct and effective," Wen said.

However, the premier conceded, "there are still no fundamental solutions to the outstanding problems in economic operations."

The supply of coal, electricity and oil and the country's transportation capabilities are still groaning under the strain and investment remains higher than normal.

"In our macro-control efforts, we must emphasize deepening reforms, readjusting structure and changing the mode of economic growth," said Wen.

(China Daily June 15, 2004)