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BEIJING, May 18 (Reuters) - Chinese spending on the likes of roads and power plants slowed in the year through April as government measures to cool the potentially overheating economy began to bite.
However, analysts said while the slower investment growth rate was positive, it did not erase fears China may have to raise interest rates for the first time in nine years to slow the economy.
"It's still too high relative to what we think is sustainable and relative to what the government wants," said Deutsche Bank senior economist Jun Ma.
"If the growth rate eases to 20 percent I think it will be sufficient to ease investors' concerns over overheating".
Expenditure on fixed assets in April was 34.7 percent higher than a year earlier, slowing from a 43.5 percent jump in the year through March, official figures showed on Tuesday.
From January-April, fixed-asset investment was 42.8 percent higher than a year earlier, versus a 43 percent rise in the year through the first quarter, the State Statistical Bureau said.
"Overall, fixed-asset investment in the January to April period is still fast and there were still relatively too many new projects, but the government's macro-economic measures have started taking effect," the bureau said in a statement.
"Growth of investment has been slowing gradually, particularly investment growth in real estate showed a marked decline."
Fixed-asset investment has been closely watched for signs the world's sixth-biggest economy may be overheating, a development that could turn the nation's economic boom to bust.
China has taken a raft of measures since last year to try to slow growth, including raising bank reserve requirements three times.
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Recent moves to cool growth have also included the issue of tighter restrictions on new projects in "overinvested" industries like property and steel on top of ordering banks to keep more money in reserve instead of channelling it into loans.
Property investment growth rose 34.6 percent in the first four months from a year earlier, 6.5 percentage points slower than in the year through the first quarter.
Investment in ferrous metals including steel jumped 92.8 percent on the year from January to April, 15 percentage points slower than in the first three months.
Deutsche Bank's Ma said the April figure only partly reflected the impact of government efforts to cool the economy.
Fixed-asset spending also slowed down in April because many investors had rushed to invest in projects towards the start of the year.
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Analysts who had expected fixed-asset investment growth to begin slowing soon said the government was still likely to take more steps to ensure economic growth would be sustainable.
Economic data this week has shown little slowdown in money supply growth and factory output. Consumer prices in the year through April rose 3.8 percent, their fastest growth rate in seven years.
Central bank officials have said China may need to raise benchmark lending rates if inflation hits around five percent.
Last month, Premier Wen Jiabao told Reuters in an interview that China needed to take "forceful" measures to rein in surges in bank lending and fixed-asset spending.
"I think the government is likely to take fresh steps to cool investment growth, but whether there will be forceful steps will hinge on economic developments," said Xu Hongyuan, economist at State Information Centre.
Fixed-asset investment was 53 percent higher in the first two months of 2004 than in the same year earlier period.
China's first-quarter economic growth was revised this week up to 9.8 percent over a year earlier from 9.7 percent.
Some officials have argued that the overall economy was healthy but that overinvestment in certain industries like cement, steel, property and aluminium needed to be reined in.