The flow of labour from impoverished areas of the mainland to prosperous cities could help ease economic disparity that threatens sustainable growth, an economist said yesterday. Unequal distribution of resources and investments has been responsible for the problems that have worsened economic inequality. The income gap in a prosperous coastal region such as Zhejiang province and the backward western area of Xinjiang was around 5,900 yuan last year. But labour, which is in abundant supply on the mainland, could be used to help address the inequality, said Andy Xie, Morgan Stanley's managing director and Asia-Pacific economist. Millions from rural areas have headed for the cities to seek work and bring back much needed capital to their home towns. 'Regional inequality ties China down,' Mr Xie said in Hong Kong yesterday. The macroeconomic measures implemented by the government to cool down the economy would only alleviate short-term pains and would not solve fundamental problems, he added. Reckless investment in industries such as steel, cement and property have fuelled growth to a breakneck pace, resulting in overheating. To cool the economy, the central government has ordered banks to curb lending and governments to regulate land use. The efforts seem to have paid off according to official statistics. For example, profits from the steel industry rose 80.4 per cent in the first half of the year. But profits were 22.1 percentage points lower than the increase seen in the first five months of the year. Overall, the economy slowed to a 9.6 per cent growth in the second quarter, a slight drop from the 9.8 per cent registered for the first three months of the year. Beijing has pledged it will continue the macroeconomic controls in the second half of the year. Mr Xie said he did not expect Beijing to introduce further measures in the second half as the effects from those introduced already 'haven't fully played out'.