The Chinese government on Wednesday said investment should be reined in or even stopped in a number of industries that have built serious overcapacity such auto and steel sectors.

China's economy grew a blistering 9.4 percent in the first three quarters of the year, but is now facing industrial overcapacity in some industries that may threaten healthy economic growth.

A guide to adjustments in the industrial structure, announced by the country's top economic planner, singles out seven industries said to be plagued by unneeded production including rolled steel, aluminum, iron alloy and automobiles.

Meanwhile, cement, electricity power, coal and textile sectors are facing "potential" over capacities, Liu Zhi, director of the National Development and Reform Commission's industrial policy department, told a press conference Wednesday.

The overcapacity of auto industry, for instance, has already reached 2 million units and new plants currently that have yet to come on line could add an additional 2.2 million units to the market.

Liu said relevant government departments should not approve the use of land and banks should not grant loans for industries where increased development is unnecessary.

A recent decision of the State Council, or the central government, urged local governments to design new guidelines, so as to encourage and support the development of "advanced productivity".

In response to a journalist's question, Liu brushed off concerns that the government's guidelines amount to economic orders that could mean a return to China's old central-planning days.

"Our guiding principle is a combination of market adjustment and government guidance while allowing market forces in allocating resources,"

Liu said, adding that even developed nations have policies on what industries should be supported or discouraged.

Wednesday's new guidelines also indicate which sectors will continue to be developed.

Energy conservation is a key criterion, Liu acknowledged. "The NDRC backs all projects that save energy and resources and that can be utilized in a comprehensive manner and especially those that can lower energy cost by means of new and advanced technologies."

The guidelines also say the government supports projects that help prevent mine disasters, as frequent, deadly mining accidents have aroused great concern of the Chinese leadership and local communities.

Liu said if the guidelines require a business to close, local governments should map out specific measures to look after the laid-off workers.

Figures from the National Bureau of Statistics show that industrial profits rose 20.1 percent in the first three quarters this year, down sharply from the 38 percent increase recorded last year.

Meanwhile, urban fixed-asset investment, an indicator of China's growing productivity, rose 29 percent in November from a year ago.

"The consequences of overcapacity in some sectors are serious," said Ma Kai, head of the powerful NDRC. "We will try very hard to achieve substantial outcome in overall volume control, but it could take several years of effort to achieve clear results."

Source: Xinhua