It was a tell-tale sign. The manhole and drain covers that went missing some days ago, and had been replaced, had disappeared once again — posing danger to motorists and pedestrians alike in a suburban neighborhood of Beijing.
Elsewhere in the city, anything metallic is a prized target of scavengers. China's smelting industry is booming, and its appetite for scrap iron from whatever source is huge.
China's red-hot economy, now the sixth biggest in the world and likely the fourth biggest in two years time, is gobbling up ever greater amounts of the world's raw materials to sustain its blistering industrial growth.
It now consumes a quarter of the world's steel, a third of its oil and half of its cement, eclipsing the United States as the primary engine of global growth in the past two years.
China's appetite is being felt everywhere.
Hong Kong's moon cake manufacturers who have to order their metal containers ahead of the Mid-Autumn Festival in October complain of increased prices of tins. "It's 30 percent higher than last year," lamented one moon cake merchant.
And in San Diego, Calif., the Union-Tribune newspaper reported that a $1.51 billion school construction project has been halted due to a severe shortage of steel, as China's massive demand for the metal has resulted in dwindling supplies and surging prices.
‘Life has never been better’
"Life has never been better," said Liu Liyong with a broad smile. Liu abandoned farming five years ago.
"I used to think twice before I'd spend a cent in the past, but now I don't worry because I know money will come in tomorrow," he said while proudly showing off his well-endowed fruit stall, which earns him more than $200 a month.
"Look around here, high-class villas are going up and there's plenty of money going around," explained Liu, referring to the real estate boom that is fast transforming Beijing's suburban landscape.
"There's no economic overheating, it's just fine," said Liu when asked about recent government moves to scale down the construction boom that underpins his optimism.
Economists warn however that the pace of growth -- 9.7 percent in the first quarter -- is unsustainable.
Recently, Professor Niu Wenyuan, one of the top economic advisers to China's Premier Wen Jiabao, warned that many countries will resent China gobbling up so many resources and polluting the world's environment.
"The problem will manifest itself within a year as steel and other plants producing far too much low-quality stuff will have to close and lay off workers once the bubbles burst," he said, according to local media.
Growth too fast
The voices of Professor Niu and vendor Liu represent some of the divergent views and interests now at play as China's top leadership grapples with the risks posed by its $1.4 trillion economy that may be growing too fast.
China's communist party rule now depends, above all, on continued economic expansion, to accommodate mounting demands which include the employment of the tens of millions laid off from bankrupt state-owned factories, and the 300 million surplus laborers in the rural areas.
Last May Day holiday, stock markets, currencies, and world commodity prices in Asia and elsewhere took a dip as Chinese authorities ordered banks to increase reserve ratio and stop rapid lending increases, an indication of the potential regional and global impact of China's economic slowdown.
"When today's Chinese economy sneezes, Asia and possibly even the rest of the world could well catch a cold," declared Morgan Stanley's Stephen Roach.
In a recent report Roach cited the fact that China accounted for 32 percent of Japan's export growth last year, 36 percent of South Korea's, 68 percent of Taiwan's, 21 percent of the United States' and 28 percent of Germany's.
Thus far, China's monetary and administrative tools have been deployed to curtail investment and construction projects in the steel, aluminum, cement, car production and property sectors.
Among the prominent casualties of the nationwide review of mega-projects: the $14 billion high-speed rail link between Shanghai and Beijing, the $600 million futuristic new headquarters of the China Central Television, and the 13-dam project on the Nu River in southwest China that was opposed by environmentalists because the area is a world heritage site for biodiversity.
On Wednesday, Vice Premier Huang Ju offered assurances that measures to rein in the economy were taking root, promising brisk but stable growth while taming overheating sectors.
“China’s economy will continue to grow at a relatively fast and steady pace,” he told a financial forum in Beijing.
What’s the strategy for the future?
Yet, the hot topic among economists is how China should proceed with the next stage of economic development.
And the United States — the world's largest economy — has a big stake in the outcome.
Already, Washington has urged Beijing to loosen controls on its currency.
During his recent visit to Beijing, U.S. Treasury Undersecretary John Taylor pressed China to adopt a "more flexible exchange rate,” arguing that it would "allow for smooth adjustments and prevent the kinds of 'hard landings' or 'boom-bust' cycles that...are so costly to any country.”
There is a pending move in the U.S. Senate to hold a hearing on China's exchange rate unless China acts "in 60 to 90 days.”
The United States incurred its biggest trade deficit with China last year, to the tune of $124 billion.
Some U.S. manufacturing and labor groups argue that the trade and job losses are due to the cheap Chinese currency that may well be undervalued by as much as 40 percent.
Rate hike?
Speculation abounds that China will raise its interest rate for the first time since 1995. Such a move, combined with a potential interest rate hike in the United States, would produce a double-whammy with serious consequences for the global economy.
It would have devastating consequences for Japan's fragile recovery and for others in Asia who will have to follow suit, according to analysts.
Hu Shuli, editor of China's most prominent financial journal Caijing, argued that an interest rate hike is the only way to cool the economy even if it hurts the equities and property markets, otherwise "the future costs will surely even be higher.”
She faulted the failure to recognize the problem of overheating last year, which explains the limited effects of belated tightening measures, thus increasing the chance of a "hard landing.”
The most recent data on China's factory output and money supply seem to support her contention. Only an interest rate rise across the board to raise the cost of capital will "highlight the difference between good quality investments and bad ones, " explained Hu.
"Monetary policy alone won't work," said Bruce Murray, Asian Development Bank chief in Beijing, adding that "China needs effective fiscal policy to deal with the problem."
Guan Peng, Anbound Consulting analyst, concurred. "Even if the central bank raised the interest rate, the effect is halved because many locally-run state-owned enterprises are not sensitive to interest rates or risks," he said.
Banking crisis
Some analysts have also warned that interest rate hikes could precipitate a banking crisis as many enterprises would be vulnerable to loan defaults due to higher repayment costs. China's banking system, technically insolvent, is saddled with some $600 billion of bad loans.
Professor Hu Angang of Tsinghua University highlighted the role of local bosses in China's current predicament, saying their broad powers need to be reduced.
"In the end, the problem is political, not economic," said Mao Yushi, head of the private think-tank Unirule.
"The problems of over-spending and excessive bank lending are issues of special privileges, and there is the greater problem of income distribution with the peasants as the neglected segment," said Mao, suggesting that China will need greater political transparency and reform as a way out.