China needs to relax its fight against inflation to ensure it can maintain enough leeway for a stable and rapid economic growth, said the State Information Center, a government think tank, on Wednesday.

To some extent, "keeping a stable and fast economic development" conflicts with the policy of "curbing inflation", said the research unit under the National Development and Reform Commission, the country's top economic planner.

It argued when the inflation rate is between 4 and 8 percent for a developing country, it can be described as "stable". The center then suggested that the government adjust the target of curbing inflation to between 5 and 7 percent for this year and next year. The central bank previously set an inflation target at under 4.8 percent for this year.

The government has so far focused on fighting inflation but it has also stressed the importance of a sustainable economic development.

The center made the proposal one day after the release of the inflation data. China's Consumer Price Index, the main gauge of inflation, rose 6.3 percent in July, a narrowed growth for a third straight month and the lowest level since last September. Economists in general predicted the index would ease in the following months, thanks to a stable food supply.

Meanwhile, China's economy showed a downturn trend. In the second quarter, it expanded 10.1 percent, dropping from 10.6 percent in the first three months and 11.9 percent last year.

The easing in growth triggered concerns of a sharp economic slowdown among economists and in the center viewed the slower growth as worrying and said the government needs to find a balance between economic development and taming inflation.

The center also warned there would be fewer stimulants for domestic consumption after property and automobile spending peaked.

(Shanghai Daily August 14, 2008)