"Given a sharp fiscal deterioration, it is questionable if the current pace of public spending is sustainable," said Zhang Jiawei, an analyst at Nikko Research Center. Issuance of domestic bonds by Beijing exceeded 600 billion yuan ($72.48 billion) in the January-October period this year, more than double the 241.4 billion yuan issued in 1997.

Even if China achieves its target of 8 per cent growth this year, outstanding government debt would still jump to about 15 per cent of gross domestic product, compared with about 6 per cent in 1997, Zhang said.

"If China's ratings are downgraded, procurement of funds from abroad would also become more difficult," Zhang said.

Rating agency Standard & Poor's Corp said earlier this month that its outlook on China's long-term rating remained negative. Moody'sInvestors Service has also put China's foreign currency debt under review for possible downgrade.

China will hold a roadshow for a sovereign bond issue next Monday to Wednesday in Hong Kong, London and New York.

"Conditions for a bond launch are now more favourable, as markets stabilised after a credit easing by the US Federal Reserve," said a manager at a US brokerage house in Tokyo.

"But signs of tighter credit mean there are going to be fewer risk-takers in the future. That would be tough for Asian issuers," he added. A survey by the US Federal Reserve of 55 US and foreign-owned banks released last week showed that banks have recently made lending terms to big firms in the United States tougher than at any time since 1990.

Hopes of export-led growth were also dim due to slower investment from abroad, which has a strong correlation with exports as about 40 per cent of China's exports are made by firms with foreign capital.

Earlier this week, China's ministry of foreign trade and economiccooperation said direct investment to China in the first 10 months of this year was $35.907 billion, up just 0.87 per cent year-on-year.

Analysts said a number of big investment deals with US and European firms clinched this year during visits to China by US president Bill Clinton and European leaders have offset a sharp drop in investment from troubled Asian countries.

But investment from non-Asian countries was also likely to taper off in the coming years if there were no aggressive market-opening measures by Beijing, analysts said.

The United States is insisting on strict conditions for allowing China to enter the World Trade Organisation (WTO), demanding Beijing to open up its service sector.

"China appears to be recently taking a stance that it would not necessarily seek a speedy entry to the WTO," said Hiroshi Imai, senior economist at Japan Research Institute.

"US and European investment could shrink if China keeps the door to its service sector shut," he added.

Despite lingeringspeculation that China might eventually opt for a currency devaluation, analysts say Beijing had good reasons to resist that temptation for as long as possible.

"The demerits of devaluation simply outweigh the merits," said Nikko's Zhang.

A currency devaluation would sharply increase China's burden of servicing foreign debts, which stood at $137.96 billion at the end of June, according to official data.

That roughly matched its external reserves, which stood at $143.7 billion as of the end of October.

Comments from Chinese officials have echoed such concerns.

The People's Bank of China deputy governor Liu Mingkang said in Sydney on Friday that any devaluation of the yuan would damage the confidence of Chinese and global financial markets.