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Minor policy change urged amid weaker economy fears

(Xinhua)
Updated: 2008-06-05 10:19

A senior government economist has called for small changes to China's macro-economic policy to avert the risk of sharp economic slow-down.

Adjustment needs to be made on earlier estimate on economic slowdown, especially after the devastating earthquake on May 12, said Chen Dongqi, vice president of the Academy of Macroeconomic Research under the National Development and Reform Commission.

The economy would become a more important government concern if it slowed drastically, said Chen.

The government had focused on using tightening policies to fight inflation and to prevent the economy from overheating.

Some proactive fiscal policies, including cuts in personal and corporate income taxes, needed to be introduced, the 21st Century Business Herald cited Chen as saying.

The purchasing managers' index fell to 53.3 in May, down 5.9 from in April. A reading over 50 means an expansion of activity, while one below 50 indicates contraction.

China has increased interest rates six times and the reserve requirement ratio 14 times since last year, amid efforts to tame inflation and prevent economic overheating.

The economy could expand by just 7 percent this year amid slow exports growth and declining property and equities prices, according to the ADB.

The People's Bank of China (PBOC), however, on Tuesday rejected as "exaggeration" warnings that the nation's exports were set to drop sharply, leading to an economic hard landing.

The quake that hit southwestern province of Sichuan had added uncertainties to the economy, but its regional and short-term impact would not change the economic fundamentals, the central bank said.