Afraid of the consequences for growth and jobs, cautious Chinese policy makers show no appetite for radical tightening measures to cool the economy.
In particular, analysts said the central bank was unlikely to get its wish for a much quicker rise in the yuan to choke off the excess liquidity that is fuelling a credit and investment boom.
The central bank is the monetary policy maker but, unfortunately, it's not an independent central bank. We have to keep this in mind, said Citigroup economist Yiping Huang.
The central bank, the People's Bank of China, did raise its benchmark one-year lending rate on April 27, to 5.85 percent from 5.58 percent, and expectations are high that Beijing will follow up with more steps to ward off overheating.
Annual gross domestic product growth accelerated to 10.3 percent in the first quarter, and economists say partial data so far shows little if any loss of momentum in the current quarter.
But Liang Youcai with the State Information Center, a government think-tank in Beijing, believes any curbs will be mild because China's leaders are worried that a sharp slowdown could undermine their goal of creating the 9 million or so new jobs a year needed to keep unemployment from rising.
I don't think the government will take abrupt tightening measures, Liang said.
He said Beijing had learned a lesson from the mid-1990s, when economic supremo Zhu Rongji slammed on the brakes to cool an overheated economy. Growth slowed sharply, fuelling criticism that Zhu had tightened too much.
Nor is the overheating as severe as in early 2004, when fixed-asset investment was growing at a 50 percent annual clip.
Annual consumer inflation is down to 1.2 percent now, in contrast to a 5.3 percent peak in the summer of 2004, while power shortages and other supply-side bottlenecks have eased, analysts say.
I think we will see sporadic interest rate rises and gradual adjustments in the exchange rate, rather than anything more radical which would increase the risk of repercussions to China's economy and global economic conditions, BNP Paribas economist Ken Wattret said at a briefing in Hong Kong.
Financial markets are braced for tightening measures to target excessive investment in high-end property in major cities.
Paul Cavey, an economist at Macquarie Research in Hong Kong, also expects a rise in banks' reserve requirements in June.
But Cavey reckons Chinese leaders see no need for a full-blown austerity package because they expect a global slowdown to take the steam out of the country's exports.
Despite lifting rates and talking of cooling property, there has been no real tightening. Why? Because mainstream opinion in Beijing seems to be that growth is under control, and a slowing globe will ease pressure on China, he wrote in a research note.
Cavey said opposition from the mainstream policy establishment to a much faster rate of climb for the yuan
The yuan in fact has weakened since it briefly pierced the 8 per dollar barrier on May 15. It traded on Thursday near 8.0250, a cumulative appreciation of less than 1.1 percent since it was revalued by 2.1 percent last July and cut free from a dollar peg.
Gao Shanwen, an economist at Everbright Securities in Shanghai, believes a stronger yuan would help curb China's trade surplus and, more importantly, help ward off a property bubble.
But policy makers were clearly not ready to risk a sharp rise.
The biggest worry is stability -- economic, political and social stability -- because the impact on some labour-intensive industries, such as textiles, would be great, Gao said.
Qing Wang, a senior currency strategist at Bank of America, agreed: The central bank feels the heat from the exchange rate because China's foreign exchange reserves keep growing, but other state agencies don't feel any pressure.
Despite the economic problems China faces, Qing gave top economic officials, particularly reform-minded central bank chief Zhou Xiaochuan, high marks.
Their greater reliance on economic levers instead of ad-hoc orders had spared the economy the violent ups and downs that it experienced last decade, he said.
I think the skills of the current economic policy makers have improved markedly, Qing, a former International Monetary Fund economist, said.
And while some criticize China's policy-making process for still being opaque, Qing says Beijing has become a lot more transparent. One sign is that he has been invited this week to give a presentation at the central bank.
Chinese officials have become more and more willing to communicate with market people and heed more views, he said.