National Economic Research Institute director Fan Gang says he expects the mainland's economic growth to remain strong at about 8.5 per cent this year, but is concerned about overcapacity and deflation. The renowned economist's forecast would mark a significant slowdown from last year, when he estimated the country's gross domestic product grew between 9.3 per cent and 9.5 per cent, aided by fixed-asset investment and a widening trade surplus. Top mainland officials have estimated the economy grew 9.8 per cent last year, but the National Bureau of Statistics has yet to announce an official figure. The economy is widely expected to slow this year. The government would be able to engineer a soft landing for the economy, Dr Fan said. But the director said he saw 'mixed signals' about it going forward. 'I think a soft landing in 2006 will not be very difficult to achieve,' he told a Mastercard news conference, arranged to announce the results of the credit card company's latest consumer confidence survey. Economic growth would be affected as the trade surplus was forecast to shrink this year - perhaps to between US$60 billion and US$80 billion, Dr Fan said. However, he rejected warnings by economists that the mainland was too dependent on exports, saying the contribution of net exports to GDP had been 'insignificant' in recent years. The government has announced it will lift the role of domestic consumption this year to improve the economy. The mainland has a high savings rate, in part because health care and education costs used to be heavily subsidised. Although Dr Fan challenged the assumption that consumption was low, he said the government should not place its hopes on the so-called 'rural market'. 'Given the income disparity and the low-income phenomenon in rural areas, the centrepiece of encouraging effective consumption is how to improve incomes of Chinese families,' he said. Overcapacity was more apparent, especially in the steel, cement, machinery and chemical industries, he added. 'For 2006, we have to pay close attention to the possibility of running the economy into deflation and we should adjust our macroeconomic policies on a regular and timely basis,' he said.