The Chinese government will stick to an economic policy that focuses on curbing inflation for the rest of the year, a senior official on Wednesday told China's top legislature, as slowing output and rising prices loom over the post-Games economy.

Economic planners would exert themselves to increase supplies of necessities, closely track key prices and make price controls more effective, National Development and Reform Commission deputy chief Zhu Zhixin told the fourth session of the Standing Committee of the 11th National People's Congress.

"A lot of factors can drive prices up," said Zhu, "There is a strong demand for primary products, with prices hovering high on international markets, while more expensive land and labor at home will add to costs."

His statements came after China's main inflation indicator showed a deceleration in July and as the world wondered where the already slowing economy would head after the glitz of the Games.

The consumer price index was up 6.3 percent last month over July last year, lower than the 7.1 percent in June and 7.7 percent in May, as tighter monetary policies adopted last year seemed to bite.

Meanwhile, the country's economic output in the first half was 10.4 percent higher, compared with 10.6 percent in the first quarter and 12.2 percent in the first half last year.

Zhu said the output slowdown was "a moderate correction from a high level".

"The national economy is heading in the direction expected by the macro-control policy."

Zhu cited the pressures on some industries and enterprises as one of the major conflicts in the economy, saying it would take time for the latest supportive policies to show an effect and for companies to adjust.

He told the top legislature the government would continue to seek a balance between fighting inflation and maintaining growth.

Tasks for the rest of the year included improving the contribution of domestic consumption to economic growth, boosting agricultural output and increasing aid to small enterprises, he said.

The government had been focusing on preventing the economy from overheating before changing the goal to "keeping steady, rapid growth" in July.

Many analysts foresaw a loosening of the tight monetary policy to provide liquidity for enterprises, especially exporters, that were squeezed by weakening demand, credit controls and rising costs.

Earlier this month, administrators raised the export tax rebate rates for some textiles and garments, while the central bank allowed more credit to small and medium-sized enterprises.

"The fiscal and monetary policies are likely to be eased, if the current trend is a guide," said CITIC Securities analyst Zhu Jianfang, "The central bank is not expected to come up with any big tightening moves after the Olympics."

(Xinhua News Agency August 28, 2008)