Soft landing seen for China's economy
(Reuters)
Updated: 2005-08-03 06:24

A lively debate is unfolding among economists whether this industrial overcapacity will lead to the return of deflation, which dogged China in the late 1990s and in 2002.

With annual consumer inflation down to just 1.6 percent in June from 1.8 percent in May, economists are nervous that China's revaluation of the yuan will amplify the disinflationary trend.

The State Information Center, a top government think-tank, is forecasting that the 2.1 percent revaluation could cut consumer price inflation by 0.4 percentage point by the end of 2006.

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