By Wang Lan (China Daily)
Updated: 2008-01-24 10:10

"If China's exports to the US and other European countries start falling, domestic consumption will become a major force to sustain the nation's economic growth," said Shen Minggao, an economist at Citibank China in Beijing.

"A transparent market is needed to ensure supply is not easily disrupted by profiteering and to get CPI growth back to an acceptable level," Shen said.

"Taking effective measures to rein in inflation should be the government's prime focus in 2008."

Many economists are calling for an efficient supply and distribution system to match higher domestic demand.

Zhao Xijun, a finance professor at Beijing's Renmin University of China, said more effort was needed to structure consumer products to cater for wide domestic demand.

Economists said a smaller trade surplus resulting from lower export growth to the US would also help alleviate pressure on renminbi appreciation in 2008.

Stephen Green, head of research at Standard Chartered China, told China Daily: "A more severe US slowdown, which drags export growth below 15 percent year-on-year, would increase the chances of a slower renminbi appreciation rate."

Jonathan Anderson, UBS Securities' chief economist for Asia, doesn't expect China's trade balance to fall this year, but said the surplus will peak in the next few quarters. That would mean a long-awaited slowdown in headline GDP growth, as rising net exports contributed more than 2 percentage points to real growth in 2006 and 2007.

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