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Like holding down a hot-air balloon, government officials are keeping a tight grip on China's inflation rate to prevent the overheating of the economy. To reduce inflation, the government has insisted the stateowned banking system curb credit to cut investment growth by the private sector. The moves seem to be working. Economic growth has slowed, and inflation, well over 12 percent for the past three years, has fallen to 10 percent. By 1996 it's expected to drop to 7 percent. "It looks as though China's economy is headed for a soft landing," says Christopher Mills, chief emerging markets economist at DRI/McGraw Hill. He projects GDP growth will retract to 6.8 percent in 1996 from 9.9 percent this year. "Though exports are still strong, investments have slowed," he notes. Exports grew by 5 percent on volume terms in '94 and are continuing at a similar pace this year. Only time will tell if China has stamped on the brakes too hard.