China will step up controls on investment in power plants, despite electricity shortages, to help ease pressure on coal supplies.

Many of the plants now under construction were launched without legal approvals, the China Daily newspaper cited Xu Dingming, director of the National Development and Reform Commission's energy bureau, as saying.

The controls, details of which weren't given, are part of a broad effort to rein in spending in sectors authorities say are expanding too quickly, straining the country's transport capacity and scarce resources.

Local governments eager to boost tax and land use revenues have allowed unauthorized construction of power plants with a total capacity of 120,000 megawatts, a figure that amounts to about 30 percent of the country’s total generating capacity, Xu said.

About half of all coal mined in China went to electricity generation and the excessive construction was putting pressure on coal supplies, the report said.

Many Chinese cities have faced brownouts in the past year as demand outstripped power supplies. But by 2006 those shortages were expected to ease, and the risk now was of a glut in capacity, the newspaper quoted Huang Feng, director of energy projects at the China International Engineering Consultant Corp. as saying.

That in turn could spell trouble for banks already loaded with bad debt, he said.

Regulators have raised key interest rates and ordered curbs on lending for construction by State banks, warning that soaring investment could trigger financial problems if such projects are commercial failures.

Authorities have also cited worries over inflation in their effort to slow economic growth, forecast at about 9 percent for this year.

Prices for many commodities had surged, and the price of coal had jumped 30 percent this year, compared with last year, the China Daily report said.

The government is accelerating construction of hydroelectric and nuclear power plants to help ease reliance on heavily polluting coal. It also planned to spend 40 billion yuan (US$4.8 billion) on searching for new coal reserves, the report said.

Chinas energy sector would require total investments of 10 trillion yuan by 2020, not including imports of crude oil and coal, Xu, of the National Reform and Development Commission, was cited as saying.

(Xinhua News Agency December 2, 2004)