China faces deflationary pressure but not for long, a government economist who asked not to be identified told Xinhua.

Deflation "isn't a problem, but a good thing this year. Price declines can spur demand," he said.

Economists have warned that prolonged deflation could raise real interest rates and discourage business investment.

"But the government should control investment in such sectors as steel which have excess capacity. Reckless increases in investment aimed at averting deflation could cause big problems," the government economist said.

"The effective control of price hikes not only helps raise living standards, but more importantly, gives us room for macro-economic controls," NBS director Ma noted.

China has cut interest rates five times since mid-September and lifted credit quotas in an effort to stimulate growth.

Gross domestic product expanded 6.8 percent in the fourth quarter, down from 9.9 percent in the first three quarters and 13 percent in 2007.

(Xinhua News Agency January 22, 2009)