China can contain inflation, says economist
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It will be difficult but China can contain inflation within 3 percent this year, a senior government official said yesterday.
Yao Jingyuan, chief economist at the National Bureau of Statistics, predicted that consumer prices will continue to break records in the next three months due to surging food costs.
"We should be alert to price increases in some particular products that will affect the overall inflationary trend, like surging pork prices did in 2006," Yao said. "It will be difficult to achieve this year's target of a 3 percent increase in consumer prices, but it can be achieved."
The Consumer Price Index, the main gauge of inflation, expanded 2.8 percent in April from a year earlier, the fastest pace in 18 months.
The Producer Price Index, the factory-gate measurement of inflation, climbed to a 19-month high of 6.8 percent in April.
Bureau spokesman Sheng Laiyun said inflation was still structural, meaning it was limited to certain categories, not an overall, uncontrollable price jump.
In April, food costs rocketed 5.9 percent from a year ago due to smaller harvests after natural disasters hit southwest China and abnormal weather prevailed around the country. Prices of vegetables soared 24.9 percent during the period, the bureau said.
The non-food sector, on the other hand, only registered a mild growth of 1.3 percent.
"Rising inflation is a serious problem, but where the CPI is heading is more important than this figure of 2.8 percent," said Tao Dong, an economist with Credit Suisse.
The State Information Center, a unit under the National Development and Reform Commission, also said the inflationary pressure will increase in the next few months. It predicted in a report last week that China's consumer prices will jump 4.2 percent in the second quarter while producer prices may surge 7 percent from a year earlier in the period.
In the first four months, China's CPI gained 2.4 percent and PPI 5.6 percent, increasing pressure on the government to achieve the 3 percent target set at the year's beginning.
China has gradually normalized its monetary policy stance after loose credit flooded the market with cash last year.
The People's Bank of China, the central bank, has raised the reserve requirement ratio three times this year and stepped up drainage of cash via open market operation.
