China's fixed asset investment growth in urban areas reached 4,477.1 billion yuan (560 US dollars) in the first seven months of the year, up 30.5 percent over the same period last year, the National Bureau of Statistics (NBS) said on Wednesday.

The growth figure is 3.3 percentage points higher than for the January-July period of last year.

Investment in real estate, a sector the central government has been trying to cool down, reached 941.1 billion yuan, up 24 percent on the same period last year, but figures through July are down marginally on the first six months.

Investment in projects authorized by the central government hit 462 billion yuan, up 26 percent over the same period last year. However, projects getting the green light from local governments topped 4.01 trillion yuan, a sharp increase of 31.1 percent.

Investment in the coal mining industry grew 42.5 percent, the power industry was up 16.4 percent and railway transport 84.7 percent. Investment in the nonmetal sector went up 50.0 percent, ferrous metal investments increased 7.6 percent and non-ferrous metal 40.4 percent.

The growth of urban fixed asset investment was 0.8 percentage points lower in July than in the January-June period, but is still in the "hot" range.

China saw its fixed asset investment grow by 26.6 percent in the first two months, 29.8 percent in the first three, drop back slightly to 29.6 percent in the first four, 30.3 percent in the first five, and a record high of 31.3 percent in the first half year.

The sharp rise in fixed asset investment is considered the major factor driving China's economic growth.

China's gross domestic product expanded by 10.9 percent in the first half year, 0.9 percentage points higher than growth for the same period last year.

Although essentially healthy, the sharp rise in fixed asset investment is potentially a risk for China which is trying to re-orient its economy in a more efficient and environmentally-friendly direction.

To prevent the economy overheating, China has adopted a series of measures, including tightening money supply to absorb liquidity in the inter-bank market, using administrative measures to limit investment in the real estate sector, tightening control on investment projects and easing management on capital outflows.

Signs of cooling investment may have emerged. According to the circular released by the NBS, investment in planned urban projects rose by 24.8 percent in the first seven months, 1.8 percentage points lower than for the January-June period and investment in projects under construction increased 19.3 percent, 2.9 percentage points down.

In a Tuesday news release, the World Bank projected a mild slowdown in exports and fixed assets investment for the second half. According to the bank, this implies a slight fall in GDP growth in the second half.

Bert Hofman, the bank's Lead Economist for China, attributed the country's investment growth to company profits and profitability and to incentives given by local governments for rapid economic growth.

China's economy is expected to grow 10.4 percent this year and 9.3 percent in 2007, the bank predicted.

Source: Xinhua