Hong Kong and Shenzhen need to speed up their integration including developing their pioneer cross-border yuan loan business, says an official from the State Council's Development Research Centre. Lu Zhongyuan, a vice-president of the centre, yesterday said the governments of both cities had been advised to step up communication on economic co-operation. 'If they can't solve their problems, they will have to take them up to a higher level, and seek the support and understanding of relevant departments of the central government,' Lu told the China Political and Economic Forum organised by China Daily. He said the Qianhai zone was an important platform for both cities to co-operate in developing high-end service businesses in finance, trade, commerce and innovation. They must speed up their co-operation in developing their pioneer cross-border yuan loan business or risk losing out to the competition in offshore yuan businesses at home and abroad. Hong Kong used to feel superior to the mainland because it was at the 'higher end' of the global value chain, but this mindset must change as Shenzhen and the rest of the country were moving up the ladder and closing the gap, Lu said. Hong Kong must be 'open-minded' about how to co-operate economically with Shenzhen and think in terms of the future of the region, he said. Domestic growth would be a focus of the central government, he said. Economic growth would bottom out in the second quarter of 2012, and rebound slightly afterwards. George Leung, an Asia-Pacific strategist at HSBC, said the central government would again cut banks' reserve requirement ratios in the near future to boost domestic demand as exports slowed. Leung ruled out the possibility of Beijing following Brazil, and more recently India, in cutting interest rates. This is despite the need to cushion the economic downturn caused by export slowdown. Inflation was likely to remain a major concern for China, he said, as quantitative easing measures in the US and Europe would continue to cause inflation in surplus countries. Contrary to speculation that the US may increase interest rates in 2014, Leung said the slow recovery pace in the world's biggest economy and the unresolved euro-zone debt crisis meant higher interest rates were unlikely. He said it could take more than 10 years to fix the euro zone's high-cost structures in order to boost the competitiveness of their economy, which would continue to be dampened by austere policies. He said the debt problem should be contained as long as the European Central Bank kept injecting liquidity into the region.