The authorities look set to give priority to the country's stable economic growth in place of inflation control in the second half of the year, economists have said.

"It is a departure from the previous policies which aimed to prevent the economy from overheating and keep rising prices from evolving into entrenched inflation," said Zhang Jun, director of the China Center for Economic Studies at Fudan University, on Monday.

The forecast follows a central bank move over the weekend, which put stable and relatively swift economic growth as part of its top priority.

The central bank's position is in turn in line with that of the top leadership, which has said that the authorities should "treat maintaining stable but rapid economic growth and controlling excessive rises in prices as the top priorities in macroeconomic controls", Xinhua has reported.

Previous policies to prevent the economy from overheating and rein in inflation were set late last year, when the economy steamed ahead with an 11.9 percent annual growth rate.

That figure has cooled to 10.4 percent for the first half of this year, amid expectations of the slowdown worsening.

Financial giant UBS has reaffirmed its forecast of 10 percent GDP for the country this year, but lowered the forecast for 2009 from 9.5 percent to 8.8 percent.

"The Chinese economy is set to slide further," said Wang Tao, head of the China economic research unit of UBS, citing a weaker global outlook and slower export-related investment.

Wang also echoed Zhang's view, that the authorities are looking to give stable economic growth more weight.

"The government is now somewhat more concerned about a sharper economic slowdown than inflation," Wang said.

If that happened, she said, the authorities could allow room for local policy maneuvers to help re-orbit the economy onto a stable growth track, although an overall readjustment of the tight monetary policies would not be possible.

"We think this opens the door for policy stimulus that targets certain sectors and regions, while an overall easing of monetary and credit policy does not seem to be in the play yet," she said.

"The local governments would be given more room to stimulate the economy."

Zhang said policymakers may shift the focus of the blanket tightening policy to a "structural adjustment", which means policies would become more flexible and more targeted toward different sectors.

"After the Olympic Games, more policies may come out to combat economic slowdown," he said.

China's economy will be "healthy" so long as its growth rate falls between 8 and 10 percent, said Wang Xiaoguang, a senior economist in Beijing. When the rate falls below 9 percent, the nation should start to relax policies, he said, adding that major stimulus measures should be taken if it goes down to below 8 percent.

Yuan appreciation

The central bank also said over the weekend in its latest statement that it will keep the yuan "basically stable" at a "balanced level", while analysts said a rise in the value of the yuan may start to stabilize after its sharp appreciation in the first half of the year.

In a previous statement after its monetary policy committee meeting for the first quarter, the central bank had said it would resort to the market "in a larger extent" in deciding the value of the yuan, an indication that was absent in its latest statement.

"It may mark a major adjustment of the exchange rate policy," said Liu Dongliang, a currency analyst with China Merchants Bank.

"The yuan's appreciation may start to slow."

The yuan's mid-point rate was 6.8277 against the US dollar on Monday, the seventh consecutive day it stood at the 6.82 level.

(China Daily July 29, 2008)