China needs to adjust its tight monetary policies and further boost domestic consumption to compensate for sluggish overseas demand that is reeling from the United States credit meltdown, said the State Information Center yesterday.

The research unit under the National Development and Reform Commission, China's top economic planner, said the country's monetary policies should always be flexible.

"If the domestic economy eases so fast that puts the financial stability at risk, China should consider another cut in the benchmark lending rate and the reserve requirement ratio," said the center in a report.

Last month, the central bank, the People's Bank of China, cut the lending rate and reserve requirement on smaller banks to give the economy a boost.

China's economy grew 10.1 percent in the second quarter, down from 10.6 percent in the first three months and 11.9 percent last year.

The center also reiterated the importance of the domestic consumer market. It suggested the government should further raise the threshold of individual income tax, annul the tax for deposit interest, and expand investments in education, health care and social security to encourage more spending.

Facing weaker external demand, the country should back competitive exporters.

(Shanghai Daily October 9, 2008)