China is moving to slow investments in the auto industry, officials said Thursday, one of several steps being taken to cool growth in sectors whose growth is outstripping demand.

A model promotes a car brand at Haikou auto show in Hainan province in this March 1, 2006 photo. China is to slow down investment in auto industry to tackle the overcapacity problem. [newsphoto]

Senior officials at China's main economic planning agency said measures to prevent excess investments in the auto industry would be implemented soon.

Those steps follow control measures for other industries such as ferrous alloy, aluminum, coke and cement, He Yanli, vice director of the National Development and Reform Commission's industry department told Dow Jones Newswires while attending a conference in Beijing.

Both foreign and domestic auto companies have been pouring billions of dollars in new investments into new vehicle factories. In March, China's Cabinet warned against overcapacity problems and said the government would limit its approvals for new auto companies.

Robust investments, sometimes in redundant capacity, are helping to keep economic growth at unsustainable levels, the government has warned. In the first quarter of this year the economy grew 10.2 percent year-on-year, the fastest pace in more than a year and well above government targets for bringing growth down to 8 percent or below.

First quarter investment in construction and factory equipment, known as fixed asset investment, rose 29.8 percent over the same period in 2005, also well above expectations.

China's car sales in the first three months this year rose 74 percent from the same period a year earlier to 890,000 units, the official Xinhua News Agency reported in early April, citing data from the China Association of Automobile Manufacturers.

The local auto industry began to pick up last year after slowing significantly since mid-2004 when the government took measures to curb bank lending to various sectors that it viewed as being in danger of overheating, including the auto industry.

Meanwhile, the government said it will shut small coke production facilities by the end of 2009 to help reduce overcapacity in that industry.

The move follows the setting of lower output capacity targets for the ferro-alloy, cement and aluminum industries earlier this week.

Domestic prices for coking coal, used to make steel, have been falling as demand lags behind supply, causing losses.

Coke producers must close coking units with a height of less than 4.3 meters (14 feet) in eastern China by 2007 and in the west by 2009, the National Development and Reform Commission said in a statement posted on its Web site Thursday.