Higher cost of food caused China's consumer prices to rise 1.9
percent year-on-year in January, figures from the National Bureau of
Statistics indicate.
The consumer price index (CPI), a key inflation measurement,
rose 2 percent in urban areas and 1.7 percent in rural areas, the
bureau said yesterday.
Food prices, which account for one-third of the index, rose 3.6
percent from a year earlier, the highest gain since March 2005.
Vegetable prices jumped 34.9 percent and grain prices rose for
the first time in nine months, increasing 1 percent from a year
earlier.
"The CPI situation is within my expectations," said Qi Jingmei,
a senior economist with the State Information Centre. The CPI is
expected to continue climbing moderately for the rest of this
year.
"The country will not face deflation, nor inflation," she said,
adding if either occurred, it would hurt the interests of the
average person and the national economy as a whole.
Zhuang Jian, a senior economist with the Asian Development
Bank's Resident Mission in China, agreed this year's CPI will be
moderate, but added it will be higher than that of last year.
"This is mainly because of the government's pending reform on
prices of resource-related prices," he said.
The lower prices for products such as oil, electricity and water
are not helpful for saving resources.
The administrative control over prices of those products would
also distort price mechanisms, he said.
As a result, the National Development and Reform Commission has
repeatedly said the government would gradually raise the prices of
those products.
Zhang Yongjun, another senior economist with the State
Information Centre, said the price adjustment would more or less
benefit industrial products accounting for about 50 percent of the
CPI, which has suffered price drops for many years.
Fierce market competition and product oversupply is keeping many
producers, especially those who make mobile phones and cars, from
raising their prices, he said.
"They prefer losing profits rather than the market shares."
Xie Fuzhan, deputy director of the State Council Development
Research Centre, said the country's CPI will not exceed 3 percent
this year.
It would be easy to keep the CPI below 3 percent by regulating
the pace at which government-set utility prices rose, he said.
"If the reforms on prices of oil and public services are
quicker, then the price increase will be a bit faster. But it will
be controllable," Xie said.
Xie's forecast was in line with the People's Bank of China's
prediction. The central bank said on Tuesday that the CPI will pick
up this year, averaging about 3 percent against 1.8 percent in
2005, and a seven-year high of 5.3 percent in July 2004.
But Yuan Gangming, a professor at the Tsinghua University, said
China will relapse into deflation sometime this year, with a single
month's CPI dropping to less than zero percent.
"There is no possibility of an inflation," he said.
(China Daily February 23, 2006)