Worried that it may be selling industrial assets to foreigners too cheaply, China will tighten screening of deals and impose new curbs on foreign acquisitions in its heavy industry, a Beijing-funded newspaper said.

A ministry-level committee under the State Council, or cabinet, will be set up to conduct the screening, Hong Kong's Wen Wei Po reported in an article published on the Chinese finance ministry's Web site Friday.

New restrictions will be imposed on foreign purchases of controlling stakes in strategic industries including steel and the manufacturing of equipment for shipbuilding and power generation, the report quoted unnamed sources as saying.

"Government departments and experts are concerned that the wave of large-scale foreign acquisitions may endanger national security, and believe restrictions and limits should be placed on purchases of domestic companies by foreign capital," it said.

Acquisitions are a large part of the tens of billions of dollars of foreign investment flowing into China.

Foreign purchases of Chinese companies were worth US$7.3 billion in the first half of 2004 alone, according to an estimate cited by the U.S.-China Business Council.

 But officials express growing concern that China may be hurting its competitiveness by allowing foreign multinationals to buy major assets at cheap prices. This concern is believed to have stalled or blocked some recent attempted acquisitions in sectors such as steel and banking.

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