CHINA is to spend a record 800 million yuan (HK$1.08 billion) this year to upgrade its infrastructure, despite repeated warnings of runaway inflation. The Construction Minister, Mr Hou Jie, also disclosed that the central Government had earmarked an initial 900 billion yuan for fixed asset investment next year. The rate of increase is the highest since 1949, according to official reports. The semi-official Hongkong China News Agency also reported a major increase in the total amount of fixed-asset investments by state-owned enterprises this year. It said the total amount of investment completed in the first quarter of the year was worth 58.8 billion yuan, a 70 per cent increase on the figure for the same period last year. The report quoted ''authoritative figures'' as saying the trend would inevitably create adverse effects on the economy if there were no ''preventive measures''. As a result of investment growth being too rapid, it said, the balance between supply and demand had already been harmed. A soaring money supply would produce a threat of inflation, the news agency said. The ''authoritative figures'' were quoted as saying one major reason for the investment boom was that localities have had greater autonomy in deciding on investments. The total amount of fixed asset investments in localities had jumped by 80 per cent during the first three months of this year compared with the same period last year. The corresponding figure at the national level was only 37 per cent. Vice-Premier Mr Li Lanqing warned last week against over-expansion in infrastructure development, which he said could fuel inflation. At a national conference on construction in Beijing on Saturday, Mr Hou admitted there were deep-seated problems which remained unresolved, although the construction industry had been presented with a golden opportunity because of the building boom. The projects included residential and commercial buildings, business facilities and, more importantly, multi-billion-dollar schemes such as the Three Gorges Dam Project. Mr Hou warned that the overall land supply was out of control as a result of the boom in the property and construction industry. The construction boom had also put further strain on the supply of building materials and skilled workers, he said, leading to a drop in the quality of construction. Vice-Premier Mr Zou Jiahua, who is in charge of state planning, agreed there had been signs of overheating in the property market. The flow of funds towards the market in the coastal regions had adversely affected normal economic activities, he said. He said property laws should be formulated as soon as possible to provide greater supervision over the property market and to curb practices such as speculation. But a Vice-Minister of Construction, Mr Zhou Ganzhi, argued that the rapid growth of the property market was merely a ''normal phenomenon'' as the economy grew.