Despite expert predictions that the Consumer Price Index (CPI)
may reach 5.6 percent growth in July and 4 percent for all of 2007,
China Securities Journal cited the newly released Monetary
Policy Implementation Report by the central bank as saying the real
CPI increase is not as big as people thought.
The advancing CPI has caused questions among investors as to
whether the inflation is serious enough to justify intensified
government macro control.
Experts said considering the growth pace of China's economy, the
previous 3 percent CPI warning rate should be upgraded to 4
percent.
According to China Securities Journal, monthly CPI growth
in the 5 percent range doesn't reflect long-term inflation. Xie
Fuzhan, head of the National Bureau of Statistics said late last
month that there is no clear sign that China is facing inflation.
In fact, short-term price increases exert little effect on the
whole economy in the long run. China's CPI in 2007 can reach 4
percent, but even that can still be healthy, he added.
The booming Chinese economy, with an annual growth rate of over
10 percent, has been pushing up prices of consumer goods. Shen
Minggao, chief economist of Citibank China said the 3 percent CPI
growth limit may only apply to an 8 percent GDP growth; given the
11.5 percent GDP in the first half of the year, a 4.5 to 5 percent
increase is acceptable.
The United States usually has an economic growth below 3
percent, while the latest released CPI reached 2.7 percent growth,
almost the same rate as economic growth. Even taking account their
different stages of economic development, the difference between
the two countries can be surprisingly big, Shen added.
Another driving force behind the CPI are rising salaries, with
urban residents' disposable income increasing 10.4 percent last
year and 14.2 percent the first half of this year and rural
residents' disposable income growing 13.3 percent. Higher incomes
are driving up market prices.
The report by the central bank also included inflation pushers
such as rising labor and energy costs, which may cause inflation in
the middle and long term.
(China Daily August 9, 2007)
