"We think this opens the door for policy stimulus that targets certain sectors and regions, while an overall easing of monetary and credit policy does not seem to be in the play yet," she said.

"The local governments would be given more room to stimulate the economy."

Zhang said policymakers may shift the focus of the blanket tightening policy to a "structural adjustment", which means policies would become more flexible and more targeted toward different sectors.

"After the Olympic Games, more policies may come out to combat economic slowdown," he said.

China's economy will be "healthy" so long as its growth rate falls between 8 and 10 percent, said Wang Xiaoguang, a senior economist in Beijing. When the rate falls below 9 percent, the nation should start to relax policies, he said, adding that major stimulus measures should be taken if it goes down to below 8 percent.

Yuan appreciation

The central bank also said over the weekend in its latest statement that it will keep the yuan "basically stable" at a "balanced level", while analysts said a rise in the value of the yuan may start to stabilize after its sharp appreciation in the first half of the year.

In a previous statement after its monetary policy committee meeting for the first quarter, the central bank had said it would resort to the market "in a larger extent" in deciding the value of the yuan, an indication that was absent in its latest statement.

"It may mark a major adjustment of the exchange rate policy," said Liu Dongliang, a currency analyst with China Merchants Bank.

"The yuan's appreciation may start to slow."

The yuan's mid-point rate was 6.8277 against the US dollar yesterday, the seventh consecutive day it stood at the 6.82 level.

(China Daily July 29, 2008)