Excessive investment, extended credit and inflationary pressure are three "notable issues" in China's economic development, said Li Yong, vice-minister of finance.

He said China will firmly resolve such issues by strengthening macro-economic control and adopting cautious monetary policies.

"China's general economic development is healthy," he told more than 200 senior bankers at an Institute of International Finance meeting in Shanghai on Friday. "We also clearly recognize the problems emerging in China's economy."

In the first three months, urban fixed-asset investment reached 705.85 billion yuan (US$85 billion), up 47.8 per cent from the same period last year. Investment in steel, cement and electrolyte aluminium is "still increasing at a surprising speed."

Investment increased faster than the government had expected despite several measures that were taken.

The excessive amount of new projects and the large scale of projects under construction have drawn concern from the government over the unreasonable investment structure.

"The redundant low quality and repeated construction in certain industries and areas is getting very serious," Li said.

Excessive investment also leads to an intense supply of raw materials and energy, including coal, electricity and oil. It drives up the credit and price as well.

The consumer price index rose 2.8 per cent in the first quarter this year.

He said China will continue to adopt cautious monetary policies to resolve inflationary pressure.

But it is "too early to talk about increasing the interest rate," said Zhou Xiaochuan, governor of China's central bank.

"A stable monetary policy is most important and we will see various solutions," he told reporters on the sidelines of the meeting.

Source: Xinhua