Fast increase in government revenues and corporate income are to blame for the intractable growth rate of investment, said Wang Yiming, deputy director of the Academy of Macroeconomic Research Institute under the National Development and Reform Commission.

Wang told the China Economic Development Forum held in Beijng Saturday that too much money going to the government and enterprises has fanned up the high-speed growth of investment.

Statistics from the National Bureau of Statistics shows that in the first half of this year China's fixed asset investment hit 5.4 trillion yuan (US$712.7 billion), up 25.9 percent year-on-year. Although it was 3.9 percentage points lower than the same period last year, it was 2.2 percentage points faster than the first quarter.

The proportion of government revenues to national income has risen from 21.1 percent in 2001 to 24.2 percent in 2006; that of enterprises rose from 15.1 percent to 17.5 percent; while that of residents dropped from 63.8 percent to 56.5 percent.

"Local governments have been acting as important economic builders instead of providing public services and social management," Wang said. "The result is that a large part of government revenues is invested in fixed assets and urban construction."

At the same time, high profit margin unavoidably spurs enterprises to reinvest their revenues to expand production, he said.

Low-priced resources such as electricity, land and water have also lowered investment cost and helped push up the overall investment, he added.

To rein in investment growth, the government must transform its functions to focus on social security, compulsory education, basic medical insurance system and other public services, while at the same time to rationalize the price of resources to curb corporation investment, he said.