A new round of measures to cool the economy are in the pipeline following the release of stronger-than-expected data last week, two economic newspapers have reported. 'The tightening measures will come soon', the Economic Observer said in a headline on a front-page report to be published today, while the 21st Century Economic Herald said: 'A series of macro controls measures are in the pipeline'. Policymakers and market regulators had been meeting over the past few days to work out fresh tightening measures in response to a sharp increase in the pace of economic growth, the papers said. On Thursday the National Statistics Bureau announced that China's gross domestic product expanded by 11.1 per cent in the first quarter from a year ago, an acceleration from the 10.4 per cent year on year growth recorded for the previous quarter. The government's target growth for 2007 was 8 per cent. Inflation accelerated to reach 3.3 per cent in March, sharply up from last year's 1.5 per cent and a level above the central bank's comfort zone of 3 per cent. All other major indicators - including retail sales, industrial production and fixed asset investment and the trade surplus - accelerated during the period. This raised new fears about the overheating of the economy, which has seen double-digit growth for four consecutive years. Sources familiar with policymaking said the People's Bank of China would react with forceful measures, such as higher-than-expected interest rates or reserve requirement rises, the Observer said. The bank has raised interest rates three times in the past year, and raised the commercial bank reserve requirement ratios six times. The measures were an attempt to mop up liquidity in the banking system, which is blamed for overheating the economy. The Herald said the China Banking Regulatory Commission, the banking regulator, held an emergency meeting on Wednesday to discuss a series of tightening proposals such as a reserve requirement rise and reduction of the export tax rebate in order to mop up liquidity and curb the rising trade surplus. The Observer said the government would also consider introducing a capital gains tax, as the government is increasingly worried that an asset bubble is developing in the equity market. Concern among mainland investors that the government would respond by seeking to slow growth sent the Shanghai Composite Index down 4.5 per cent on Thursday, even before the economic data was released, and contributed to weakness in markets across Asia. But mainland markets recovered on Friday with the Shanghai Composite Index rebounding 3.9 per cent to close at 3,584, compared with being near 1,000 just two years ago. Analysts said fear of stringent government curbs increased market volatility. The Observer said the stock exchange regulator would soon publish a statement to warn of the risk in the equity market, as the government saw an increasing risk of a crisis in its still-immature financial system and capital markets. The Herald said the statistics bureau delayed its quarterly news briefing from last Wednesday to Thursday because it was asked to wait until the leadership made its judgment on the economy, and to maintain a 'unified tone' with the government.