SHOPPING SEASON: Customers purchase clothing at a department store in Yinchuan, capital of Ningxia Hui Autonomous Region (WANG PENG)

As China faces runaway inflation, experts at the Second Global Think Tank Summit held by the China Center for International Economic Exchanges on June 25-26 in Beijing exchanged their views on inflation control. Edited excerpts of some speakers' views follow:

Lawrence Lau, Chairman of CIC International (Hong Kong) Co. Ltd.:

The risks of inflation lie in rising expectations of long-existing inflation. If long-existing inflation expectations are formed, it will be hard for the government to abate these fears. Eventually, the economy may even face stagnation.

Generally speaking, there are two kinds of inflation: inflation caused by commodity prices and that caused by asset prices. In recent months, China's high CPI growth rates were mainly caused by rising costs of farm produce, food and rent. But the country's core inflation rate, an index excluding price changes of farm produce and energy products, is rather low at around 1.5 percent.

But inflation caused by asset price hikes should not be neglected, especially property prices, which have nearly doubled since the level in 2006-07.

Controlling inflation needs to guard against potential risks deriving from rising prices in both agricultural sector and the red-hot property market. The government should stabilize agricultural produce prices and long-term supply and demand in the property sector. Expectations of long-existing inflation caused by short-term price hikes should be prevented.

Meanwhile, low-income households should be protected. Low-income groups are most vulnerable to inflation. While taking measures to protect them, how to avoid disrupting market rules? Take electricity prices for example. Low-income households' power consumption is always much lower than middle- and high-income earners, so charges for the first 20 kwh each month can be set at a low price or just exempted.

How to mitigate inflation expectations? The government can adopt measures including using state reserves, like grain reserves, to stabilize food prices; imposing taxes or non-price restrictions like standards for fuel efficiency to lower the long-term energy demands; and introducing financial tools for ordinary people such as inflation-proof savings, so that they do not need to buy commodities or physical assets to avoid the risks. This will also show the government's determination to control inflation, which will help ease the public's inflation expectations.

The government can also increase imports as the yuan appreciates and reduce import tariff, to increase the expectations for domestic supply.

Both traditional measures and price controls cannot effectively mitigate the current inflation in China. We could adopt a series of policies to affect the long-term market demand and supply to change the inflation expectations. While the "invisible hand" can't take effect, we need the government—the "visible hand" to solve the inflations problem.