China's fixed asset investment growth slowed further in May compared with April, due to central government efforts to cool the economy.

Fixed asset investment stood at 439 billion yuan (US$52.9 billion) during 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, the bureau said.

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

Economists are worried that fixed-asset investment, which grew year-on-year at 53 percent during the first two months, would heavily affect the economic growth.

"Excessive growth in some sectors and areas 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 automobile sectors - 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 property 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 track to avoid a hard economic landing.

Foreign direct investment, another important economic figure, grew at a year-on-year 11.34 percent in the first five months, also at a slower pace.

According to a Xinhua report, Premier Wen Jiabao said the overall situation in the Chinese economy is fine, with the government's macro economic controls having taken effect. Wen said that during an inspection tour of Central China's Hubei Province on Friday.

"The overly-rapid growth of investment has been curbed, the increase of money supply and credit has slowed down, the prices of production means 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.

The foreign trade has witnessed a constant rise and the revenues have reported a sharp increase.

"All these have shown that the macro economic control policies and measures adopted by the central authorities are timely, correct and effective," Wen said.

However, the premier conceded that "macro economic controls remain an extremely arduous task" as "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 under quite a strain judging from the actual demands, and the investment scale is still larger than normal, he said.

"In our macro-control efforts, we must lay emphasis on deepening reforms, readjusting structure and changing the mode of economic growth," he said.

(China Daily June 15, 2004)