China Should Adjust Policy Early - Government Researcher - Wall Street Journal

--China should adjust its policy early, a government researcher says

--China may launch big policy changes in July or August to boost economy, says Chen Dongqi

--China should cut its lending rates, he says

(Adds comments by government researcher Chen Dongqi in the fourth, 6th-9th paragraphs, data in the second, fifth and 10th paragraphs, Premier Wen's comments in the third paragraph).

BEIJING (Dow Jones)--China should be alert for economic slowdown and adjust its policy early, a government researcher said Tuesday.

Comments by Chen Dongqi, vice director of the academy of macroeconomic research under the National Development and Reform Commission, the country's economic planning agency, came after China's April data showed all-round slowdown in industrial output, fixed-assets investment, trade, money supply and retail sales.

Chen's comments echoed Chinese Premier Wen Jiabao who said that China will put more emphasis on ensuring steady growth, according to a report of the official Xinhua News Agency on Sunday, marking a decisive shift in rhetoric toward stimulating growth.

The government may become nervous when it sees economic growth of less than 7.5%, but it would be too late then, Chen said in a speech.

China's economic growth in the second quarter will likely be lower than 8%, and the growth may be lower than 7% in the whole year of 2012 unless more incentives are issued, Chen said.

China's economic growth slowed to 8.1% in the first quarter from a year earlier, its slowest pace since the spring of 2009. Beijing officially aims for gross domestic product growth of 7.5% for this year, but some private economists said the actual target within government is still above 8%.

China may launch big policy changes in July or August to boost economy, Chen said. He didn't elaborate.

China should further loosen its monetary policy by cutting the lending rates and reserve requirement ratio for banks this year to boost economic growth, he said.

When China's consumer price index is lower than 3%, China should cut both deposit and lending rates, Chen said.

He added that consumer inflation is expected to decrease to 2% to 2.5% on year in June, and inflation will maintain a downward trend in the second half of the year.

The consumer price index rose 3.4% in April from a year earlier.

-Yajun Zhang and Liu Li contributed to this article, Dow Jones Newswires; (86 10) 8400-7712; yajun.zhang@dowjones.com