Local government investment rose 26 percent to 376.5 billion yuan in the two months, reflecting how the provinces have been able to continue spending at a fast clip despite central government efforts to cool the economy. In contrast, investment funded directly from Beijing was up 13.9 percent to 45.7 billion yuan during January and February, the National Bureau of Statistics said.

The two-month figure compared with the 25.8 percent increase in fixed asset investment for 2004 but was ahead of the government's 2005 target of 16 percent growth announced last week at the National People's Congress.

However, fixed asset investment fell gradually throughout 2004 from a high of 44 percent in the first quarter.

Investment by the state and state-owned companies in the first two months rose 4.5 percent to 214.7 billion yuan, while investment in real estate remained robust, jumping 26 percent to 120 billion yuan, the NBS said.

Premier Wen Jiabao Monday warned that over-excessive fixed asset investment could lead to further ``overstretching'' of the economy and unsustainable imbalances but admitted difficulties in controlling a strong appetite for growth in the localities.

``Investment growth in fixed assets may very likely pick up again, as coal, electricity, oil and transportation are still in short supply,'' Wen warned, as he urged more balanced investment flows.

During the first two months, the country continued to plow money into the energy sector with the coal industry investing 3.1 billion yuan, up 148 percent from the same period last year.

Meanwhile, investment in the oil and gas industry was up 19 percent to 8.9 billion yuan, the NBS said.

Investment in oil processing, coking and nuclear fuel processing was up 46 percent at 2.8 billion yuan, while investment in thermal and hydroelectric production and supply was up nearly 60 percent at 47.5 billion yuan, it said.

Fixed asset investment in rural areas and rural industries rose nearly 70 percent in the first two months to 1.8 billion yuan but investment in industrial areas was up 28 percent at 170 billion yuan.

State-owned firms increased their investment to 353 billion yuan, up 25.6 percent over the same period last year, while fixed asset investment from Hong Kong, Macau and Taiwan companies was up 15 percent at 28.9 billion yuan.

Investment from foreign-funded companies grew 24.5 percent to 35.8 billion yuan over the same period last year, it said. AGENCE FRANCE-PRESSE