Accelerated investment growth is what Chinese policymakers least want now. As the government tries very hard to prevent the national economy from overheating, such a pick-up in investment will only complicate the task of macroeconomic control.

If growth of capital spending is to be effectively slowed, policymakers should not only raise the cost of borrowing but also implement stringent environmental and energy efficiency standards.

Latest statistics show that China's investment in construction, factory and other urban fixed assets rose 26.9 percent to 8.9 trillion yuan (US$1.2 trillion) in the first 10 months. The increase was 0.1 percent higher than the growth rate in the same period last year and 0.5 percent higher than the January-September figure.

At a time when the country is in dire need of an economic slowdown to avoid overheating, a runway investment boom in itself makes great cause for concern.

Worse, the pick-up in investment follows earlier figures showing a record trade surplus in October; the sharpest rise in retail sales since 1999; faster money and credit growth; and a rebound in consumer price inflation to a decade-high of 6.5 per cent.

It seems that the Chinese economy is still firing on all cylinders to achieve its fifth year in a row of double-digit growth this year. This might help cushion the world against a looming slowdown of the US economy. But it will do little to help reduce China's long-term and heavy dependence on investment and export for economic growth, a prerequisite for the country's pursuit of sustainable development.

Admittedly, Chinese policymakers are keenly aware of the necessity to check investment growth, especially those energy-consuming and polluting ones.

The central bank has already raised interest rates five times so far this year and ordered banks on nine occasions to hold more of their deposits in reserve to raise the bar in obtaining loans from banks.

Nevertheless, as the country's consumer price inflation has hovered above 6 percent in recent months, the one-year lending rate of 7.29 percent still makes it attractive to investors who need to borrow funds given the overall fast rising profits of Chinese enterprises.

Hence, if the authorities are to bring investment growth down, at least, the cost of borrowing for investors should be further hiked.

Besides, the government can enforce all the energy-saving and environmental protection measures in a more aggressive way.

(China Daily November 19, 2007)