China's economy is headed for a soft landing this year and will maintain a growth rate of at least 10 percent , said Zhu Baoliang, Chief Economist at the State Information Center (SIC), a think tank managed by the National Development and Reform Commission, the Official Shanghai Securities News reported.
In an interview with the newspaper, Zhu suggested that the government should raise the yuan exchange rate by an appropriate amount to tackle inflation while simultaneously providing subsidies to citizens on low-incomes. He also advocated a tightening of monetary policy.
According to Zhu, even if inflation eases in the second half of the year, China's basic economic situation won't improve significantly. He said price hikes would lead to increased costs and declining profits for enterprises, which would in turn bring about a reduction in investment. Moreover, a decrease in domestic consumption and exports would also pose threats to the economy.
But Zhu remained confident that China's economy would achieve a soft landing.
"We can always adjust policy in line with the economic situation," he said.
Zhu predicted commodity prices would maintain a month-on-month increase in the second half of the year and resource prices would continue to rise in 2009, due to the on-going reform of the resource pricing mechanism.
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(China.org.cn by Yan Pei, June 30, 2008)