Among the major economic problems confronting China, two are particularly difficult. The problem that has lately received most attention and concern is actually the less difficult of the two. The second is not only more difficult, but also has been largely ignored in public discussion. The easier problem is the so-called "overheated" Chinese economy, and the worry that the "bubble" may burst with serious consequences for Asia and the world economy. China has achieved and sustained a remarkably rapid rate of economic growth -- 9.2% in 2003 and an annual rate of 9.7% in the first quarter of 2004. Along with rapid GDP growth have come various indicators of overheating. These have included a 3.5% increase in the consumer price index in the first quarter of 2004 on a year-over-year basis, a 20% rise in the money supply in 2003 partly due to foreign capital inflow and a $30 billion jump in China's foreign exchange reserves. At China's Boao economic forum in April, President Hu Jintao explicitly acknowledged the overheating problem, while expressing confidence that it can be controlled and a "hard landing" avoided. There are reasonably strong grounds for his confidence. Awareness of the problem by China's top policymakers is an encouraging sign as is their recognition of the various policy instruments they can employ in a timely manner to forestall and mitigate the problem. These instruments include raising interest rates, boosting capital and reserve requirements in the four main state banks, and installing and enforcing more rigorous standards of risk assessment for bank lending under the guidance of China's Banking Regulatory Commission.