China's urban fixed asset investment rose 26.5 percent year-on-year to 1.027 trillion yuan (150.35 billion U.S. dollars) in the first two months of 2009, the National Bureau of Statistics (NBS) said Wednesday.

The pace of growth was higher than the same period in 2008, when urban fixed asset investment expanded 24.3 percent. It was also higher than the 26.1 percent annual growth last year.

"The acceleration in investment reflected the positive effect of the 4-trillion yuan stimulus package in boosting the economy. We can see a big increase in investment with government support," said Zhuang Jian, senior economist with the Asian Development Bank.

Fan Jianping, economist with the State Information Center, supported that interpretation. Fan added that real investment growth was probably higher than the raw numbers indicated, because the prices of industrial materials such as steel, nonferrous metal and fuels had been declining since late 2008.

Also, statistics jointly released Tuesday by the NBS and the National Development and Reform Commission (NDRC) showed that both consumer and producer prices fell last month, with year-on-year declines of 1.6 percent and 4.5 percent, respectively.

MORE PROJECTS, MORE SPENDING

In the January-February period, investment in projects authorized by the central government rose 40.3 percent, while spending on projects approved by local governments increased 25.1 percent.

Of 78,696 projects in progress nationwide, 18,533 were new, up 28 percent from a year earlier. Total planned investment in these projects was 743.7 billion yuan, up 87.5 percent.

"The jump in new projects showed many industries started construction at the beginning of 2009, encouraged by the stimulus plan," said Fan.

A particularly significant increase was in railway and other transport investment, which jumped 210 percent to 63.1 billion yuan.

Zhang Hanya, economist with the Research Institute of Investment under the NDRC, said the leap in spending was in line with the stimulus plan, in which infrastructure construction had priority.

Among the three industry sectors, the growth rate was highest in the primary industry sector (farming, fishing, forestry and the like), up 100.3 percent.

The secondary sector saw investment rise 24.8 percent and the tertiary sector by 26.9 percent.

However, real estate investment growth nearly ground to a halt, rising just 1 percent to 239.8 billion yuan, compared with a 32.9 percent gain a year earlier.

The property slowdown wasn't surprising, Fan said. Real estate spending grew rapidly for nearly a decade, but it was being affected by the economic slowdown. Construction activity had slowed in the second half of 2008 and would take time to recover, he said.

CONTINUED EXPANSION

Economists said investment was likely to continue growth during the rest of 2009, with more funds poised for spending.

The jumps in new projects and ready funds indicated promising prospects for investment growth, said Fan, referring to a 33.6 percent year-on-year expansion of spending to 1.8 trillion yuan in position for urban projects.

"New projects in January and February will receive more government and private fund injections in six to 12 months, keeping fixed asset spending at a high level in the fourth quarter of 2009 and the first quarter of 2010," Zhang told Xinhua.

Zhuang urged China to do more to encourage private-sector investment, as growth could not be achieved with government spending alone.

&Source:Xinhua