Behind the 10.9 per cent economic growth in the first six months of this year, concerns over overheating are mounting.

Fixed asset investment growth further accelerated, to 29.8 per cent during the period 4.4 percentage points higher than that of the same period last year, the National Bureau of Statistics said yesterday.

That compares to a 27.7 per cent growth rate in the first quarter and 25.7 per cent in 2005.

It is hoped that investment growth can be reined in the second half of the year, as macro control measures gradually take effect.

However, economists are not optimistic.

Many new construction projects are still to break ground, and with 2006 being the first year of the latest Five-Year-Plan another round of mass building is expected across the country.

Local governments don't want to see a slow-down in investment, which could weaken their local economic growth rates.

And it isn't easy for banks to adjust to the tight credit environment and curb lending to big projects when their capital adequacy and liquidity are at their strongest ever.

Even with credit curbs, investment enthusiasm is unlikely to fall, said Yi Xianrong, a financial researcher with the Chinese Academy of Social Sciences.

Many projects will be able to find alternative funding sources to bank loans, he said.

As Yi sees it, the best way to cool down the growth in investment is interest rate hikes. And they should go into effect as soon as possible.

"It is unlikely we'll see a substantial slow-down in investment growth in the second half of the year if the central bank does not order an interest rate hike," he said.

There was wide speculation of an imminent interest rate hike even before the second-quarter figures came out yesterday, but the government has not yet announced one.

Real estate remains in the spotlight in the anti-overheating campaign.

The sector reported a 24.2 per cent growth in investment during January and June, 0.7 of a percentage pint higher than a year ago.

Total investment in urban real estate development reached 769.5 billion yuan (US$96.2 billion) in the period.

Investments in coal-mining, oil and natural gas exploitation, and rail transportation expanded by 45.7 per cent, 30.3 per cent and 87.6 per cent respectively in the first half of the year.

"Prosperity continues but problems also accumulate," wrote Chen Jijun, a macro economics analyst with CITIC Securities, in a monthly report to clients in mid June.

His report indicates that excessive investment growth in certain sectors demands more attention and tightening measures.

And his concerns are shared by the government also in mid June, after the release of the May figures, the State Council said it would strictly control the scale of urban construction and the number of new projects in real estate and sectors with excessive capacity.

Meanwhile the central bank urged domestic banks to control medium- and long-term lending and improve their loan structures. On July 5 higher reserve requirements were introduced for banks.

It will take time to see exactly how much these tightening measures will affect investment growth, but most economists agree there is still much more to be done to upgrade the nation's economic structure.

Chen estimated fixed asset investment growth at around 28 per cent for the whole year.

The State Information Centre estimated 27 per cent, a minimum level to support the fast economic growth.

As the economy is expected to continue to boom in the second half of this year and next year, the government will undergo more tests of its ability to tame investment growth and lift economic efficiency.