ONE of the most hotly debated questions in China - and in the rest of the world, for that matter - is whether this nation's economy is dangerously overheated and headed for a nose-dive.

March economic data showed the economy expanding at a fast clip, but economists were quick to point out that the year-on-year figures were skewed by the poor performance in 2009 from the global financial crisis.

Voices in the debate are divided.

"China's economic growth is strong, and there are some clear signs of overheating," said Stephen Green, chief economist of Standard Chartered Bank (China) Ltd.

"The key is whether the authorities can steer the economy onto a more sustainable growth path, or whether generalized inflation and an asset bubble will cause further overheating and a policy response which causes a sharper slowdown in the second half of 2010 or in 2011."

Government officials don't quite see it that way. Li Xiaochao, a spokesman of the National Bureau of Statistics, said China's economy is far from any risk of overheating. "China's economic growth has managed a good start for this year," Li said. "It has laid the foundation for the country to achieve its annual economic growth target."

Yao Jian, a spokesman for the Ministry of Commerce, even suggested China should continue to expand its stimulus program to support economic recovery until exports show a sustained turnaround.

"Although China's exports increased 28 percent from a year earlier in the first three months, the rate was based on a sharp fall last year," said Yao.

Compared with the same period in 2008, exports were up only 3.3 percent," he noted. "China's economy still requires a faster expansion in exports to bolster the total growth rate."

Economic overheating is always a concern for policy makers because it creates supply shortages, feeds overproduction, breeds asset bubbles and can all come to grief in a crash when boom turns to bust.

In the first quarter of this year, China's gross domestic product expanded 11.9 percent on an annual basis in real terms, to 8.06 trillion yuan (US$1.18 billion). That followed expansion of 10.7 percent in the fourth quarter of last year.

The latest growth data were the strongest since the last quarter of 2007, beating market expectations and intensifying the debate about overheating.

In the view of Standard Chartered's Green, China needs to adopt tougher measures to rein in growth. "We still look for two interest rate hikes, an increased impact from the loan quota and additional moves on the property sector in the second quarter," Green said. "We also expect the exchange rate against the US dollar to start moving, albeit very gradually, in the second quarter."

However, he acknowledged "the winds in Beijing" seem to have been blowing against tightening in recent days.

Indeed, Chinese authorities are insisting that China will stick to a relatively easy fiscal policy and a proactive monetary policy, and it won't start to wind back the massive stimulus package, at least not before the end of the year.

Some other economists are more neutral in the debate. "Developments in the first quarter suggest that the economy is well on track," said Wang Qing, a Morgan Stanley economist. "The strong reading can be partly explained by the low base in the first quarter of last year."

He said Morgan Stanley had "tweaked" some of its estimates but kept the broad parameters of its outlook on China unchanged. "We now expect one interest rate increase in the second quarter, the yuan revaluation in the summer and another interest rate gain possibly in the third quarter, hinging on the timing of a rate rise by the US Fed and on the inflation outlook."

Alaistair Chan, an analyst at the Moody's Economy.com, also takes a more middle road, suggesting there are signs the economy is cooling.

"Although the first-quarter GDP data show a strong recovery is taking place, growth is flattered by a weak base from the first quarter of 2009," he said. "Monthly data even show a slowdown in fixed investment and loans, and indicate the government's tightening measures are beginning to have an impact."

China has tightened bank lending criteria to try to rein in a stubborn housing market bubble, but it hasn't raised its official central bank rate since cutting it five times in 2008.

Zhou Xiaochuan, governor of the People's Bank of China, the central bank, rebutted speculation about higher official rates recently. "Who said China will raise interest rates?" Zhou responded when bombarded by questions from the media at the annual Boao Forum for Asia, held earlier this month in southern China.

Analysts said the government doesn't want to backslide on its achievement of staving off the worst of the global financial crisis and thus run the risk of the Chinese economy slipping into a much slower pace of development.

Inflation pressure, a major consideration in setting monetary policy, seemed somewhat tamed in the March data.

The Consumer Price Index, the main gauge of inflation, grew 2.4 percent from a year earlier, slowing from a 2.7 percent pace in February.

But, still, inflation remained above the benchmark one-year current deposit rate of 2.25 percent, meaning that savers are falling behind in their rates of return.