Investment has soared in Chinese manufacturing

On Wednesday, Chinese Prime Minister Premier Wen Jiabao told Reuters that Beijing was readying "forceful" steps to cool a huge surge in investment.

Reports that China had banned smaller banks from lending for the rest of this week followed, although the central bank denied it had done any such thing.

Shares in China, Korea, Australia and elsewhere fell following the news.

The Nikkei 225 in Tokyo was closed on Thursday for a public holiday.

Wildfire growth

China's economy has been among the world's fastest-growing for some time.

But 2003 saw a fresh spurt, with gross domestic product expanding 9.1%.

The main driver has been a 43% leap in investment in fixed assets such as industrial machinery and construction.

That has stoked fears that the economy will overheat, triggering government action to restrict lending and tighten land-use rules to slow industrial developments.

Shares

These moves lent substance to the stories that smaller banks had been told to block new lending for a few days, despite official denials.

Mr Wen says the banking system is the first priority

Combined with Mr Wen's warning - in an exclusive interview with the Reuters news agency - that it was time to take the economy off the boil, the result was to hit commodities firms across the Asia Pacific region.

In Korea, the Kospi index fell more than 2.5%, with steel giant Posco leading the way down.

Australia's main ASX index fell almost 1.3%, while the Hong Kong Hang Seng slid 1.2%.

And according to Howard Gorges of South China Brokerage, some of the Hong Kong market's best performing stocks this year have shed 35-40% of their value in the past two weeks.

"We've had a sell-off in the China stocks, particularly those that have been very hot - cement stocks, automobiles, and so on," he told the BBC's World Business Report.

Dashed currency hopes

Mr Wen's interview also contained cautionary words for those hoping China could soon change its currency policy.

Despite the booming economy, the Chinese yuan is pegged at about 8.28 to the dollar, making Chinese exports cheaper and attracting ire from some US politicians and unions.

Mr Wen made it clear that sorting out the investment boom - and most importantly the banking system, hobbled by massive bad debts to underperforming state firms - was the top priority.