China's industrial output rose 18.5 per cent in January and February, the highest in the last eight months. In December 2006, the growth was 14.7 per cent. The high industrial growth has been putting pressure on the country's central bank to raise interest rates to prevent the economy from overheating.

According to China's National Bureau of Statistics, steel product output shot up 25 per cent, underlining the government's concern that factory capacity may exceed demand and lead to falling prices and bad loans.

Zhou Xiaochuan, China's central bank governor, had raised interest rates twice last year and ordered banks to set aside larger reserves five times in eight months to cool lending and investment.

With the latest industrial output figures in hand, the central bank is expected to ask Chinese banks to curb loans, raise cash reserves requirements and consider raising interest rates.