Hedged by the SARS epidemics and rising unemployment rate, the Chinese government is working hard to strike a balance between curbing excessive industrial investment while encouraging the growth of new economic sectors.

Ma Kai, minister in charge of the State Development and Reform Commission, told lawmakers in Beijing yesterday that high growth was needed to harness the rising unemployment rate exacerbated by SARS.

However, the emerging excessive investment in the steel, building materials, nonferrous metals, and automobile sectors, if untreated, would lead to economic overheating, he said.

"The trend of excessive investments and wasteful duplication in construction is picking up," Ma said in a report on the year's economic development and the government work plan for the rest of the year.

During the first six months of this year, production and investment in the steel and iron sectors grew by 21 percent and 130 percent respectively, following last year's already high growth.

Meanwhile, in the automobile sector, small scale and weak independent development capabilities were real problems, and 70 of the 123 plants capable of producing whole vehicles have a yearly output less than 10,000 cars.

Ma also warned that banks were lending too much. Money lent by financial institutions in the first seven months of this year has exceeded the total volume of last year, he said.

Under the current mecha-nism of lax supervision, more bad loans were almost inevitable.

However, the fast growth rate in consumption has been a boon for government officials and economists.

"Problems emerging in the course of development should be addressed with methods of further develop-ment," Ma said.

He told lawmakers that the government would encourage the construction of residential apartments suitable for common urban dwellers, not just luxury villas for the new rich.

The government will further open the market of second-hand apartments and install a guarantee mechanism for apartment loans, he said.

Ma outlined a series of moves the government is taking to spur consumption, including new policies on automobile sales to improve services for buyers, a rejuvenation plan for the tourism and aviation sectors and the development of chain-store retailing services.

China recorded a growth rate of 8.2 percent in the first half of this year with its GDP valued at 5005.3 billion yuan (US$605.24 billion), Ma said.

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