Investment falters as industrial activity flags

Hu Yifan, chief economist with Haitong International Securities Co Ltd, said slowing investment growth was the outcome of a smaller number of new projects in the second quarter. In June, the National Development and Reform Commission only approved two new projects, she said.

"Because of the absence of support policies, any change in the investment growth rate will depend on whether there are massive infrastructure projects in the months to come," Hu said.

First-half infrastructure investment (excluding utilities) rose 25.3 percent to 2.73 trillion yuan, according to the data released on Monday.

Investment in the property sector totaled 3.68 trillion yuan, up 20.3 percent. The growth rate was up 3.7 percentage points year-on-year and up 0.1 percentage point from the first quarter.

Tang Jianwei, a senior analyst with the Bank of Communications Co Ltd, wasn't optimistic about any rebound of investment growth in the second half.

"The expansion of investment in the infrastructure and property sectors will choke off capital to other sectors amid a stringent monetary policy environment. A continuously gliding manufacturing sector will also restrict the upward trend of investment growth," he said, explaining that falling industrial product prices and overcapacity are curbing companies' willingness to invest.

Tang said the government might take further moves to support investment growth in the second half, especially in the areas of urban renovation, environmental protection and information. He forecast that full-year fixed-asset investment will expand 20.4 percent.

Fan Jianping, chief economist at the State Information Center, a government think tank, said investment is still the largest contributor to the growth of the world's second-largest economy, accounting for 53.4 percent of the 7.6 percent growth in the first half.