The mainland economy has cooled sufficiently for Beijing to avoid further tightening measures, according to a report by a top government think-tank. The report by a team of researchers at the State Information Centre, a unit under the National Development and Reform Commission, confirms rumours of widespread lobbying within the government against a further stiffening of monetary policy. 'In the first quarter, the speed of economic growth dropped and the momentum leading towards an excessive trade surplus and over-rapid growth was brought under control. The danger of fast economic growth turning to overheating has declined,' said the report, which was carried by yesterday's Shanghai Securities News. Gross domestic product growth slowed to 10.6 per cent in the first quarter after hitting 11.9 per cent last year, mainly as a consequence of softening international demand for Chinese exports. Although the report acknowledged that inflation was on the verge of crossing into dangerous 'red light' territory, it said monetary measures were biting and ruled out the need for further interest-rate increases. 'Macro-regulatory policy should implement the measures already in place. No new tightening polices should be introduced for the time being,' the report said. Instead, it suggested existing money supply controls, including raising the amount of cash kept by banks in reserve and enforcing credit quotas, should be maintained. The required reserve ratio now stands at 16 per cent after being raised three times this year. Economists continue to disagree about the mainland's best course of action as it faces the contradictory pressures of inflation at home and slowing demand abroad. 'We believe an imported soft landing is in sight,' said Morgan Stanley economist Wang Qing. 'The global downturn, attributable to a recession in the US, should help the Chinese economy to cool off without the government taking aggressive tightening actions by resorting to blunt policy instruments,' he said, adding that he expected no further interest-rate increases this year. However, Standard Chartered argued in a research report that worries over inflation, which hit 8 per cent in the first quarter, was likely to press the central bank into raising interest rates a further four times over the next eight months. 'We believe pushing base rates up is good policy, since only positive real rates will constrain underlying investment and loan demand,' the bank said. The report by the State Information Centre also advocated raising grain subsidies and said Beijing should be wary of allowing electricity tariffs to rise with the price of coal. 'As the economy is almost self-sufficient in coal, the authorities could either keep domestic contract prices low or simply tax away coal producers' windfall and pass it on to electricity companies,' said UBS chief Asia economist Jonathan Anderson.