HTML clipboardAgence France-Presse . Beijing

China said Friday its spending on new factories and equipment remained brisk, following a slew of data suggesting the economy may be far from the slowdown policy-makers are trying to engineer.

Fixed asset investment in cities rose 24.3 per cent in the first two months of 2008 compared with a year earlier, the National Bureau of Statistics said in a statement.

Overall urban fixed investment — a key measure of spending on infrastructure projects — for the period was 812.1 billion yuan ($114b), according to the bureau. The figure indicated a slight acceleration compared with a year ago. In the first two months of 2007, fixed-asset investments were up 23.4 per cent.

‘The figures prove that corporates maintain a strong desire to invest,’ said Li Wei, an analyst with Standard Chartered. China’s economy, the world’s fourth-largest, grew by 11.4 per cent in 2007, the fifth consecutive year of double-digit economic growth.

Fixed-asset investment is seen as a major source of growth in China along with net exports, and has been targeted by official eager to find ways to keep the economy from overheating. Premier Wen Jiabao said during the ongoing session of China’s parliament that preventing an overheated economy and reining in inflation were the two top priorities for 2008.

But investment in real estate — a key area of concern because of the speculative nature of the market—still saw brisk growth in the first two months of 2008, rising 32.9 per cent from the same period in 2007.

This is in spite of a series of measures adopted by the government to cool down the property market, including policies announced last year to make it more expensive to buy a second home. The investment figures come after other data released this week showing that China has a long way to go before it has cooled down the economy.

The figure that attracted most attention was 8.7 per cent inflation recorded in February, which was the highest level in nearly 12 years, triggering expectations of some sort of imminent government action. China’s trade surplus also shrank by nearly two thirds in February from a year earlier to 8.56 billion dollars, partly because a vibrant domestic economy spurred a steep rise in imports.

‘We expect the government to take further tightening measures in the coming months, which is likely to put downward pressure on domestic investment,’ investment bank Goldman Sachs said in a research note. Chinese stocks fell 1.07 per cent Friday morning, dragged down by banks and real estate shares as investors worried that soaring inflation would trigger a new round of tightening measures, battering corporate profits.

While fixed-asset spending was up steeply, foreign funding for investments in China weakened markedly, declining 6.2 per cent in the two-month period from a year earlier. For most of its economic statistics, China does not provide separate data for January and February to avoid the distorting effect of the Lunar New Year, which may fall in either of the two months.

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