The CPI rose 3 per cent in November on a year-on-year basis, compared with an average of 0.3 per cent in January and February.

Gross domestic product (GDP) for the first three quarters totalled 7.9 trillion yuan (US$956.6 billion), up 8.5 per cent, according to the National Statistics Bureau (NSB).

The country expects an annual GDP growth of 8.5 per cent of the year, said Qiu Xiaohua, the NSB deputy director.

Industry reported a total added value of 2.88 trillion yuan (US$350 billion) in the first three quarters, a year-on-year rise of 16.5 per cent, while government revenue rose by 22.5 per cent.

The proactive fiscal policy has been carried out for six straight years in China since the Asian economic crisis in 1998, while government investment - such as treasury bonds - has been the engine for the nation's economy.

The government has issued 800 billion yuan (US$96.74 billion) in treasury bonds since 1998.

Nevertheless, things have changed this year.

In the first eight months, government investment accounted for 5.1 per cent of all investment, down from 14 per cent in the same period of 1998.

Investment in fixed assets in September was 6.3 percentage points down from June and was likely to go on falling in the fourth quarter, said Ma Liqiang, director of the Economic Operation Monitoring Bureau of the State Development and Reform Commission.

During the first 11 months, State-owned and State-holding companies reported 347.4 billion yuan (US$41.9 billion) in profits whereas shareholding and foreign-funded companies earned 331.8 billion yuan (US$39.9 billion) and 239.7 billion yuan (US$28.9 billion) respectively.

The internal drive in part came from the growing demand of domestic consumers, resulting from continuous economic growth in the past decade, said Fan Jianping, an expert with the State Information Centre.

The past decade's growth had laid the foundations for a significant jump in consumer demand in urban areas, Fan noted.

The NSB predicted that China's GDP per capita was likely to top US$1,000 for the first time ever this year and GDP to top 11 trillion yuan (US$1.33 trillion).

Consumer demand has undergone a major shift from daily necessities like food and clothing to housing, luxury cars and telecommunications, he added. Commercial housing sales increased by 43.9 per cent and car sales by 77.1 per cent in the first seven months of this year over the same 2002 period.

The government should go on striving to create a fair and favourable environment for non-State capital and companies by speeding up the reform of administration and continuing to lower market entry requirements in an effort to maintain the internal drive, said Li Boxi, a noted expert with the Development Research Centre of the State Council.