A official told a business development forum at the weekend that though China's economy continues to grow very rapidly, the government should take measures to prevent either excessive inflation or deflation next year.

"This year China's economy has still been developing at a very high speed. The government should keep paying attention to macroeconomic adjustment and control," said Yi Gang, assistant to the bank's governor, at the 2006 Forum on the Development of China's Enterprises.

This forum was organized by the Development Research Center of State Council's Enterprises Institute and lasted from December 17 to December 19, according to Securities Daily on Monday.

Yi said the growth rate of China's economy this year is around 9.4 percent, a level that has lasted for three years.

He said: "Both the consumption price index and the price index of production materials have show that the price growth rate has slowed down."

According to the National Bureau of Statistics, from January to October, the price index increased 1.9 percent and is expected to remain under 2 percent at the end of 2005, lower than the figure of 3 percent predicted by many experts at the beginning of the year.

The investment of capital assets is a key factor in accelerating economic development, and its growth rate is estimated to be 27 percent this year.

"The rapid growth of a favorable balance of trade is another key factor to promote economic growth," he said.

From January to October, the favorable balance of trade reached a record US$80.4 billion.

He said: "The favorable balance of trade has lasted ten years. Between 1994 and 2004, the highest figure was US$40 billion and the average annual figure was about US$20 billion. This year it has taken 4 percent of GDP and this will greatly influence our economy in the future."

According to him, the gap between M1, the sum of money in circulation and in deposits, and M2, M1 plus fixed deposits, is larger than usual.

Due to rapid growth in enterprises' fixed deposits, M2 increased 18 percent from last year, but M1 went up by only 12 percent; the gap between their increases widened from around 4 percentage points in the previous three years from 2001.

The issuance of short-term financial securities has also accelerated the growth of M2, and the figure this year is US$14.7 billion.

The interest rate of the whole market continues to fall slightly, said Yi, and fluidity is weaker than before.

(China.org.cn by Wang Ke, December 21, 2005)