A PRINCETON University economist says the exchange rate of the yuan against the US dollar can be maintained at its current level if China can avoid serious inflation. Gregory Chow, a professor of political economy, believes China will be able to avoid serious inflation in the coming years, as it has done in the past decade, but there is some uncertainty. Professor Chow said Beijing leaders took inflation seriously and had successfully applied the means at their disposal to block the problem over the past decade. He said records of policies to deal with inflation in 1985, 1988 and 1993 showed that Beijing was able to contain it. For example, to deal with the inflation problem in the early 1993, Beijing invoked both administrative and economic means, including controlling credit and raising interest rates. But Professor Chow said he was concerned that the recent decentralisation of economic and political power might make it more difficult for the central bank to exercise effective control of money and credit. ''Although some might hope that the institutional reform of the monetary system would improve the ability of the People's Bank of China to exercise control, such institutional reforms take time and are unlikely to yield significant improvements on monetary control in the 1990s,'' he said.