CHINA will soon launch new programmes to cool its overheating economy, with forecast full-year inflation hitting 20 per cent, says Hong Kong economic analyst Thomas Chan Man-hung.
Looming social unrest throughout the country, will force the government to adopt a policy of retrenchment in the coming few months, Mr Chan quoted sources as saying.
He also said there were unconfirmed reports of reshuffle of the Chinese leadership as a move to over-ride Vice-Premier and economic chief Zhu Rongji, who was criticised of failing to observe a tight money policy.
The State Statistics Bureau on Tuesday also forecast the full-year inflation would hit 19.5 per cent, nearly twice the government's original target.
'I believe the government will soon adopt the one and only method - to retrench funds for credit and other investment projects,' said Mr Chan, reader and co-ordinator of the China Business Centre at the Hong Kong Polytechnic.
He attributed the alarming inflation rate to farm product prices which have soared by about 50 per cent since last December, as the state increased prices to pacify discontented farmers.
'The government has also injected too much money for investment expansion in the past two years. It's a totally wrong approach,' he said.