Infrastructure investment expected to grow

Investment in infrastructure construction is likely to see steady growth in the second half, which can boost the entire economy, Zhu Haibin, chief economist in China with JPMorgan, said in Beijing on Monday.

More reform measures are expected to be introduced in coming months to inject private funds into fixed-asset investments, especially for railway projects that can create new growth for regional economies, Zhu said.

"But it is hard for the government to greatly increase fiscal spending or boost bank loans in the next two quarters." Instead, credit may increase at a slower pace, he said, as accumulative corporate and local government debt, together with the problem of excessive production may increase potential financial risks.

A research note from JPMorgan said earlier that the country's local government debt may exceed 14 trillion yuan ($2.28 trillion) by the end of 2012, compared with 10.7 trillion yuan at the end of 2010 reported by the National Audit Office.

The US banking group predicted a slower-than-target growth of this year's GDP — 7.4 percent, as downside risks may increase in the third and fourth quarters. "It may hit the cyclical bottom of 7 percent in the last three months, down from the forecasted 7.4 percent in the third quarter."