One sign in support of this prediction is that the real estate industry, the major powerhouse of economic growth, has not stopped growing in recent months despite the macro-control policies and the slowdown in fixed-assets investment growth.

Investment in real estate increased by 24 per cent in the first eight months over the same period last year, while the same figure in 2005 was 19.8 per cent. When the central and western parts of the country are viewed separately, every province or region had a jump of more than 30 per cent in its investment in real estate development during the period.

Therefore, the real estate sector has not seen any noticeable decline in its growth despite the authorities' efforts to cool down the economy. To make things worse, this sector in the central and western provinces had prospered. It is impossible to curb economic overheating when the real estate sector continues its robust boom.

On top of that, a closer look at bank loan growth is also worrying. The total bank loans have ceased increasing dramatically, but the reduced growth is mainly caused by shrinkage in short-term loans. Mid- and long-term loans are still growing.

That is to say, commercial banks are also making the necessary arrangements according to the policy target of macro-control by the central government. After several State-owned banks issued their stocks on the securities market, they would be forced to grant more loans with the money pooled through the issuance. Thus, the banks would be strongly motivated to give out more loans and support a new round of investment expansion.

To sum up, the most eminent driving forces for economic growth are the investment pulse of local governments in the real estate sector, the bank loan boom after the State-owned banks get listed and accelerating urbanization in the country. The authorities may have to make extra efforts to really bring down the economic temperature if they do not change these factors.

A final key question to consider is which of the two should be the promoter of the economy the market or the government?

The author is a researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences

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