China should let the yuan strengthen further and keep a tight control on bank credit to filter out wasteful and low-tech firms, a state researcher said in comments published on Friday.
Ba Shusong, a researcher with the Development Research Center, a think-tank under China's cabinet, said that appeals for slower yuan appreciation and increased tax rebates for garment, toy and shoe manufacturers would only delay the much-needed upgrading of the export sector. In an opinion piece published in the official Financial News, a paper run by central bank, Ba said it was too early to relax monetary tightening because inflationary pressure remained strong.
It would be wrong to ease credit controls as well, even though small companies in China's coastal manufacturing hubs were struggling because of cash shortages, he said. "It is an inevitable and painful process, must-have pain in the process of economic upgrading," he said. China's economy slowed to 10.1 percent annual growth in the second quarter from 10.6 percent in the first quarter, while consumer inflation eased to 7.1 percent in the year to June from 7.7 percent in May.
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