This conclusion is drawn from the drop in three key figures indicating economic performance. Gross domestic product (GDP), industrial output and investment in fixed assets all experienced slowed growth by the end of September, compared with their dramatic boost earlier this year. Over the same period, bank loan growth also declined.

Obviously the central government's macro-control efforts have worked and the overheated economy is temporarily recovering at a reasonable pace.

According to economic theories, there is a simple standard to judge whether or not an economy is overheated. As long as the economy does not outgrow a specific growth rate, it is in a normal condition. When that ceiling is broken, the economy is overheated.

The standard usually applied in China in recent years is 8 per cent or 10 per cent for annual growth of GDP. Thus, the GDP growth achieved in the third quarter, 10.4 per cent, makes the economy still look like it's overheated.

However, a country's economy is influenced by so many factors that the standard for measuring it should also be complicated. And different results could be reached using different frameworks.

There are therefore big questions to ask: Which of these standards should be adopted? Does the standard reflect the real situation in China? Would it fit into the different regions of the country?

Beyond the figures indicating economic growth, what really matters is whether the economy is in good shape. A most fundamental criterion to judge if a market economy works well is the degree of freedom the businesses and individuals enjoy in their economic decisions.

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