If curbing excessive investment growth is imminent, policy-makers should make sure this round of macroeconomic control will be carried out in a more market-oriented way and with a higher environmental target.

Since the release of growth statistics for the first quarter a week ago, talk of another round of government efforts to rein in rapid expansion of fixed-asset investment has become increasingly loud.

The Chinese economy registered a faster than expected 10.2 per cent growth in the first quarter, largely thanks to reaccelerated investment growth. The country's investment in fixed assets jumped by 27.7 per cent between January and March, 4.9 percentage points higher than the same period last year.

The National Development and Reform Commission has recently responded by singling out a number of energy-consuming industries, like the aluminium, coal and cement sectors, as targets of industrial restructuring. By highlighting the risk of overcapacity in these sectors, the nation's industrial watchdog is set to stop approving new projects to rein in breakneck investment growth.

The latest government-led drive to combat overcapacity naturally reminds us of the previous round of macro control that occurred two years ago. When social fixed investment was found to have surged by more than 40 per cent in the first quarter of 2004, the authorities came up with a slew of cooling measures to force an economic slowdown.

The sound and stable performance of the Chinese economy in the past two years is evidence of the effectiveness of that round of macro control featuring many administrative means like tightening land approval and bank lending.

But the country's new economic conditions require new approaches to deal with problems that seem old to us.

On the one hand, the rebound of investment in the same sectors that were targeted by the previous round of macro control shows that the effect of administrative measures might be too short-lived to see their industrial restructuring through.

On the other hand, the fact that house prices skyrocketed in many cities after the government decided to reduce the supply of land also proves the limitations of administrative measures. They neither stabilized housing prices nor held down construction of new houses as policy-makers expected.

Suggestions to make better use of the monetary policies to adjust both supply and demand in a market-oriented way deserve serious consideration from authorities, particularly given the country's large inflows of capital that have inflated domestic liquidity in the past two years.

Besides, this round of macro control can and should be seen as a necessary campaign to add teeth to the central government's commitment to reduce pollution and raise energy efficiency. The goal of lowering the country's overall energy intensity by 4 per cent this year is a very useful criterion to determine which investment projects should be controlled.