CHINA should remove price controls introduced to curb inflation as they will deter production and may lead to shortages, economists said Sunday.

China capped or froze prices on a range of daily necessities late last year to try to tame inflation, and to lower expectations that prices would keep rising.

“Price controls will discourage production, which will lead to less market supply and work counter to the government’s efforts to curb inflation,” said Zhou Qiren, a senior economist at the Chinese Center of Economic Research at Beijing University.

The authorities must instead control money supply, which was the ultimate source of inflation, Zhou told a financial forum.

Song Guoqing, another Beijing University economist, agreed that price controls were counterproductive. He said rising inflation was a currency phenomenon.

“China’s monetary policy should target inflation and the central bank should do whatever is needed to dampen inflationary expectations,” Song told the forum.

Although the government had promised to redouble efforts to fight inflation, what it had done was far from enough, he said.

Song said allowing the yuan to rise even faster than it has, say by more than 10 percent a year, would greatly reduce inflationary pressure in China.

The government should not readily relax policies aimed at cooling the economy just because it fears the impact of the global economic slowdown that is now unfolding, according to Song.

Justin Lin, who will take over as World Bank chief economist in May, said there was no need to worry about a Chinese slowdown either because of weaker U.S. growth or because of an investment downturn following August’s Olympic Games in Beijing.

Chinese banks had only very small exposure to U.S. subprime mortgages, virtually ruling out a direct fallout on the domestic financial markets, he said.

What’s more, China’s exports to the United States were mainly for everyday use, limiting their vulnerability to a cutback in discretionary consumer spending, Lin said.

He also said Olympics-related capital spending was small in relation to the size of the economy. China, moreover, would host other international events requiring investment, while demand for better infrastructure across the economy was very strong.(SD-Agencies)