Chinese premier urges cooling prices

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Premier Wen Jiabao said the government needs to cool down consumer prices while avoiding major fluctuations in the country's economic growth, according to a statement issued on Tuesday.

The government will simultaneously handle the tasks of maintaining steady growth, restructuring the nation's economy and managing inflation expectations, the statement said.

The statement came after a series of meetings between Wen and government officials from eight of the country's provinces, as well as leading businessmen and economists. The meetings were held from July 4 to 11.

"Stabilizing prices remains the top priority for our macro-regulatory policies," Wen said, noting that the policies should be amended to be more flexible and forward-looking.

The government is currently grappling with a three-year record high inflation rate of 6.4 percent. However, the country's economic growth is beginning to slow, which may bode problems for cooling inflation.

The June Purchasing Managers Index (PMI), a key indicator of China's manufacturing activity, expanded at its slowest pace in 28 months in June, falling by 1.1 percentage points month-on-month to hit 50.9 percent.

Wen said that a prudent monetary policy should be kept in place. Financial institutions should improve their credit structure and increase financial support for small businesses, he said.

Efforts should be made to avoid lagging effects that may result from external factors, Wen said.

Wen said that stabilizing the country's food supply and cutting logistics costs will help to tame inflation, as soaring food prices are the driving force behind the rising inflation rate.

Wen also said that measures to cool down the country's runaway property market should be properly implemented in order to help combat inflation.

While discussing the risks of local government debt, Wen urged local authorities to control debt growth while properly dealing with existing debt.

The National Audit Office estimated that local governments borrowed a total of 10.7 trillion yuan as of the end of last year.

China is slated to release economic data for the second quarter on Wednesday.