The speedy return to robust growth has ended any worries about lingering fallout from the outbreak of SARS (severe acute respiratory syndrome) last spring.

The SARS epidemic pulled the country's gross domestic product (GDP) growth down from 9.9 percent in the first quarter to 6.7 percent in the second.

The renewed momentum is surely inspiring news, but it did not spawn a consensus among experts on the outlook for the national economy.

Domestic economists seemed divided on the direction the economy might be moving following the announcement of new economic numbers.

Citing red-hot investments in some key sectors like real estate development and the automobile industry, as well as the rocketing bank loans behind both areas, some researchers warn that current economic growth is too rapid for the nation to sustain.

Statistics show that fixed asset investment has jumped by 30.5 percent from January to September over the same period in the previous year. At the same time, retail sales edged up by 8.6 percent, and the consumer price index (CPI), a key inflation gauge, rose year-on-year by only 0.7 percent.

Given the highest investment growth rate since 1994, "the Chinese economy has already been overheating,'' asserted Xu Xiaonian, an economist with the Research Department of China International Capital Corporation.

Memories of runaway inflation triggered by unchecked investment growth in early 1990s are still fresh to Chinese economists.

At that time, the Chinese economy experienced high inflation, with the CPI rocketing by 14.7 percent when fixed-asset investments jumped by 32 percent.

Instead of price hikes, however, deflationary pressure was the main target of Xu's alarm.

"An appropriate tight monetary policy in the short term is necessary to curb excessive investment and reduce overcapacity,'' Xu wrote in a recent issue of Caijing magazine.

Though such an effort could aggravate deflation for the moment, Xu insists it is far better than severe deflation caused by overcapacity in the long run.

Meanwhile, some others contend that ongoing acceleration is still not enough to enable the country to shrug off lingering deflationary pressures.

"It is still premature to say that the economy is overheating,'' said Xia Bin, a financial expert with the Development Research Center at the State Council.

As a former official for the People's Bank of China, the country's central bank, Xia fully understands at what a high speed the country's money supply has grown.

Outstanding loans by domestic commercial banks have soared to 2.47 trillion yuan (US$297.6 billion) by the end of September, far more than the 1.8 trillion yuan (US$223 billion) that they lent in the whole year of 2002.

More worrisome is that most of the investment and loans had gone to already-oversupplied industries including property, iron and steel, automobile and alumina.

Some researchers cautioned that such an expansion of money supply would soon lead to price hikes.

Prices of steel and coal have already gained in altitude as the country's industrial sectors rev up and up. And recent price rises for grain and pork have prompted worries about inflation.

But Xia argues that as long as money supply is controlled at the present level, there will not be much upward pressure on prices.

On the one hand, recent price hikes are basically driven by the rise of producers' costs, instead of by strong market demand.

On the other hand, price fluctuations in the international market exert an increasing impact on domestic prices as the Chinese economy integrates further with the outside world. Though some prices are rising in the global market, the recovery of the world economy remains sluggish.

Contradictory as they are, both arguments shed light on a different part of the challenges to which the country must respond in pursuing balanced long-term growth.

China's economic growth is definitely picking up. Latest figures from the National Statistical Bureau indicate the country's GDP totals 7.91 trillion yuan (US$953 billion), rising at an annual 8.5 percent rate in the first nine months.

Foreign observers have even dramatically swung back from alleging China has been inflating its growth figures to hinting that the new statistics might even underestimate the country's economic reality.

The about-face from just a year ago speaks volumes for foreign investors' resurging interest in the Chinese economy, the sixth biggest and one of the fastest-growing economies in the world. For them, the country's galloping growth, to a large extent, means more business opportunities.

Yet, for Chinese economists, growing at breakneck speed is no longer a top priority of the country's economic policies.

Efficiency and sustainability of economic growth weigh more and more heavily on the minds of both policy-makers and advisers.

"While maintaining the current growth momentum, I think efforts should be focused on surmounting structural problems to facilitate coordinated development of the economy and society, '' noted Wu Jinglian at the China Industry Development Forum held last week in Beijing.

Wu, a renowned economist, threw his weight for those who sound alarm bells.

He pointed out that the current economic boom funded by bank loans is of little efficiency. Inefficient investments would add to the structural imbalance of the economy.

He also mentioned that low efficiency of investment was the root cause of the East Asia financial crisis in 1997.

In absence of remarkable demand-led price hikes, rapid growth of investment and GDP may also point to the possibility of asset bubbles resulting from excessive money supply, according to Wu.

If so, the policy-makers would not afford to be slow in spotting and pricking those bubbles.

The country's impressive growth record this year confirmed a common view that the Chinese economy has entered into a new round of rapid growth since 2001 when the country gained its World Trade Organization membership.

However, the sharp contrast between soaring investment and lukewarm consumption exposes an underlying problem -- that not many domestic projects have become market-oriented yet.

Under mounting employment pressure, it is true that China has to keep its economy growing at a fairly high speed. But along with the establishment of a market-based economic system, the country must allow efficiency to triumph over speed in sustaining economic growth.

(China Daily October 29, 2003)