As expected, the growth of the Chinese economy apparently stopped gathering speed in the past quarter. However, the possible rebound of investment and lending requires the government to keep its hand firmly on the brake.

The latest statistics point to a desired economic slowdown resulting from enhanced macro controls.

China's gross domestic product (GDP) grew by 10.4 per cent year-on-year in the third quarter, down 0.9 percentage points from the second quarter.

A stunning 11.3 per-cent growth of the Chinese economy in the second quarter from a year ago, the fastest expansion in a decade, had prompted the central government to come up with tightening measures to take the steam out of growth.

Between July and September, the authorities not only raised interest rates for the second time this year but also imposed many curbs on construction and other investments. The policy implication was clear: the country's investment and lending is growing too quickly for comfort.

Thanks to such efforts to avert overheating, the national economy has begun to slow its pace while remaining on the long-term track of rapid growth.

China's fixed asset investment rose to 7.19 trillion yuan (US$909 billion) in the first nine months of this year, up by 27.3 per cent from the same period last year. The growth rate was 1.2 percentage points higher year-on-year, but 2.5 percentage points lower than the growth rate in the first half of this year.

It is certainly too early to tell if the investment frenzy has been effectively checked. But given the central government's move to tighten controls over land supply, bank lending and market access, it is more than likely that the number of new construction projects will go down further with the growth rate of investment.

Quarterly numbers clearly show that tightening measures are taking effect.

Nevertheless, policy-makers need to keep applying the brake, and not only to ward off inflation or financial crisis triggered by excessive investment. A more pressing task is to save its environmental and energy-efficiency goals.

As a growth engine, the Chinese economy has served both its people and the world economy well, with many years of high-speed growth. However, the Chinese authorities have fully recognized the urgent need to adopt a sustainable growth pattern in order for it to continue to work smoothly and efficiently.

For this year, a 4-per-cent reduction in energy intensity has been named as one key task. But sizzling economic growth, particularly an unchecked investment boom, has only brought the country's energy efficiency further down.

It is now difficult for the country to fully meet its annual energy-saving goal. Yet, if the economic slowdown continues, policy-makers can take the chance and get tougher with those energy-consuming investment projects.

(China Daily 10/20/2006 page4)