Not just the stock market, one burner of China's red-hot economy is fixed-asset investment, which headed straight up the first five months of this year.

 

The booming investment in everything from new computers to new factories poses an additional challenge to the country's achieving its energy and environmental goals.

 

The latest figures from the National Bureau of Statistics show that fixed-asset investment in urban areas, including manufacturing equipment and home furnishings, soared 25.9 percent - 3.2 trillion yuan (US$418 billion) - from January through May, compared with a year earlier.

 

Particularly noteworthy, the total planned investment for new projects rose 6.1 percent in May, reversing the decline for the first four months of the year.

 

Such a rebound in new projects on the back of the existing high-speed growth in fixed-asset investment means that, for the foreseeable future, this investment will continue to surge if no effective tightening measure is quickly adopted. If no change takes place, the country's efforts to rebalance its economic growth away from reliance on investment and export will achieve little.

 

Last week Premier Wen Jiabao urged further measures to cool the economy. While admitting that industrial production is growing at a faster rate than desired and that the trade surplus is too big, he said the monetary policies should be "moderately tightened" to secure a stable and fast-growing economy.

 

Obviously, the authorities are considering policy responses to the accelerated fixed-asset investment growth.

 

A blanket ban on new investment projects is certainly undesirable. After all, the strong rebound of investment is based on the country's long-term upward trend of industrialization as well as rising profits.

 

To get twice the result with half the effort, the government should significantly raise the environmental and energy-efficiency requirements for new fixed-asset investment projects.

 

To fulfill the country's five-year goal of raising energy efficiency by 20 percent and cutting emissions of key pollutants by 10 percent by 2010, it is necessary to make sure that all existing enterprises go greener.

 

Part of this challenge is to prevent new polluters and energy-guzzling enterprises from entering the market.

 

At the same time, aggressive enforcement of existing environmental and energy laws will greatly help curb many investment projects that still fail to adequately factor in environmental costs.

 

(China Daily June 18, 2007)