Leading economists have warned of "a complicated and sensitive stage" facing the Chinese economy due to a combination of domestic hurdles and external financial and price uncertainties.
They suggested the central government should take "flexible, comprehensive and timely approaches" to readjust its policy portfolio amid global oil, grain and resource price surge.
Led by the central government senior advisor Zhang Zhuoyuan, economists nationwide have expressed the urgency at a weekend forum on China's economic growth and business cycle, organized by the Institute of Economy of the Chinese Academy of Social Sciences.
Facing a global grain price rise and rapid cost increase of farming production materials, Zhang urged the government to raise the minimum prices of grain by a big margin. On average, the domestic purchasing price of rice and wheat set by the government is less than half of that in the global market.
"We need strong determination to raise the prices of grains, which can help increase farmers' income and rekindle their enthusiasm in farming," said Zhang. "And finally, they can secure our grain supply in such a fragile and competitive global market."
He urged the government to further raise the prices of refined oil following Friday's hike and said he believed the higher fuel prices could help China realize its energy-saving goal of 20 percent in 2006-10 per unit of GDP.
All the pricing reform will further push up inflation to some level, Zhang said, forecasting a moderately high inflation rate for China for the coming two or three years. "But if we don't take such measures, more loss is ahead."
Liu Shucheng, director of the academy's institute on economic research, said the external uncertainties such as ongoing US subprime crisis have added to the difficulties of the policymaking process in China.
"The domestic and external difficulties are mounting and we still need time to reconsider our policy choices," said Liu.
Lin Zhaomu, executive president of the Macroeconomics Research Academy of National Development and Reform Commission, said the earthquake may slow down China's economy by 0.5 percent, leaving the growth rate at around 10 percent this year.
He said the economic loss brought by the quake may reach 700 billion yuan, which could make Sichuan's provincial economic growth 5 percentage points lower than last year's rate and the national rate this year would be 1 percentage point lower.
(China Daily June 24, 2008)