China should not relax policies - NBS economist

BEIJING, July 27 - China must continue to use fiscal and monetary policy to stimulate the economy or face a backslide in growth, the national statistics agency's chief economist said in remarks published late Sunday.

Yao Jingyuan of the National Bureau of Statistics said inflation was unlikely to be an issue in the short term, as China still faces overcapacity despite a stabilising economy.

"The economy is still climbing up the hillside now, and we need to keep the continuity of the policies," Yao told Xinhua news agency.

"We should not take our foot off the accelerator. If we do, the economy will slide back," he warned.

He said overall price levels would remain low in 2009.

The recent boom in the stock and property markets, although partly driven by liquidity, is supported by the real economy and market confidence, he said.

China's top leadership last week reaffirmed the government's accommodative monetary stance and active fiscal policy, dampening market speculation on possible tightening after economic data continued to improve.

Annual growth rose to 7.9 percent in the second quarter from 6.1 percent in the first three months.