State leaders are aware of the need to rein in an economy that is galloping out of control. But they have yet to admit publicly just how far it is has bolted from their grasp. There is a need for them to acknowledge that the mainland economy is overheating and to take the tough measures needed to cool growth. Otherwise, the mainland will continue to move worryingly towards a social and economic precipice. The government's approach has been to take incremental steps, such as those announced by the central bank yesterday ordering lenders to increase their reserve ratio to 11 per cent from May 15, up from 10.5 per cent. This was the seventh such move in the past 11 months; another measure, increasing borrowing costs, has been tried three times in the past year. These and other tightening measures are clearly not working, however, as the 11.1 per cent first-quarter growth rate announced earlier this month indicates. The figure was 0.7 percentage points higher than the growth rate for the previous three months. Nor are the steps bringing inflation to heel: the Consumer Price Index rose 3.3 per cent in March, 0.3 percentage points more than the government had expected and half a percentage point more than the year-end target. It is not difficult to understand why such fundamentals are on the rise. The trade surplus in the first quarter almost doubled to US$46.4 billion, while new bank loans - 1.4 trillion yuan for the same period - amounted to nearly half of last year's total. People from all walks of life are borrowing money to invest in the soaring stock market and booming real estate sector. This is fuelling the mainland's demand for commodities and energy, straining national and international resources and putting pressure on the environment. The consequences of the economic bubble bursting would be devastating. Students who are putting tuition fees and living expenses into the stock market would be financially ruined, a blow to the nation's future. The aged, their life savings gone, would become a bigger burden to the state. White-collar workers who lost everything in a property crash would join the welfare queues. State leaders are well aware of the need to curb inflation, surging stock markets and wasteful investment. They have, over many months, been trying to gradually slow economic growth in way that does not prompt a downturn. It is a delicate balancing act. The central government leadership, mindful of the 17th Communist Party Congress in the autumn, at which a reshuffle is likely, and the Beijing Olympics next year, has an understandable desire for stability, social harmony and continued economic growth. But the government is approaching the economy gingerly, tweaking rather than taking the forceful action that is needed to rein it in. This may prove to be insufficient for an economy that has the potential to spiral out of control. Liquidity has to be reined in and this can only be done through ordering banks to be more responsible when it comes to giving loans. More stringent measures are needed to accompany those that have already been implemented. There is a need to further strengthen the regulatory regime and, in particular, to make sure that applications for loans and construction projects are more closely vetted. Most important of all is getting the message across to the public. A good start would be for officials to admit that the mainland is facing an emerging economic crisis that needs urgent decisive attention.