Fitch Ratings today said in Beijing on Thursday strong investment spending and growth in bank lending could prompt China to further tighten its monetary policy.

The agency also warned that China's steel sector could face further pressure on earnings due to over-capacity and intensified competition. During its inaugural Corporates conference in Beijing, Fitch's analysts also discussed China's corporate governance reforms, the burgeoning auto sector, uncertainties in the telco sector as well as the impact of reforms on China's oil and gas sector.

Providing a backdrop for developments in the corporate sector, James McCormack, head of Asia Sovereigns, said China's 2006 GDP is expected to grow by a still robust 9.5%, marginally slower than last year.

"The country continues to show strong growth momentum. Not only did fixed asset investment growth show no signs of slowing in the first quarter, it may actually be accelerating," said Mr. McCormack.

Bank lending has also picked up in the first quarter of this year and China's money supply growth is above target, implying that there is ample liquidity in the banking system.

"The increase in interest rates announced by the People's Bank of China last month may be followed by additional measures to curtail lending," said Mr. McCormack.

The continued growth is consistent with China's expanding role as a regional manufacturing centre, but the agency warned that there is a risk of increased protectionist pressures in the US, particularly if its economy slows later this year.

By People's Daily Online