The consumer prices rose 1.8 percent in October compared with a year ago, due to higher food prices, the National Bureau of Statistics said Thursday.

October's jump in the consumer price index (CPI), a key inflation gauge, was the highest since September 1997.

Urban consumer prices rose 1.5 per cent year-on-year, while those in rural areas rose 2.4 per cent, the bureau said.

For the first 10 months, the CPI rose a year-on-year 0.8 per cent.

Food prices were up 5.1 per cent in October compared with a year ago, with grain rising 3.2 per cent and fresh vegetables soaring 16 per cent, the bureau said.

Meat prices rose 8.1 per cent while cooking oil prices jumped 17.1 per cent, it said.

Qi Jingmei, a senior economist with the State Information Centre specializing in consumer prices, said that higher food prices, which contributed more than 30 per cent to the CPI, were mainly because of the rise of grain prices on the domestic market since mid-October.

The price of wheat rose an average of 40 to 80 yuan (US$4.80-9.60) per ton in major wheat production areas between October 16 and 19.

The corn price rose 80 to 120 yuan (US$9.60-14.50) per ton in North China during the three days, while the price for rapeseed and rice rose 20 per cent and 10 per cent respectively.

The price for cooking oil rose by as much as 86 per cent in some areas.

"The rise in grain prices will continue to have a significant impact on the CPI in the remaining two months of the year,'' Qi said.

Zhang Liqun, a senior researcher with the State Council's Development Research Centre, said the rise in grain prices was mainly because of the reduced production resulting from the adjustment of China's grain structure as well as natural disasters, such as floods and droughts.

Grain production in the summer dropped by 2.4 million tons this year compared with last year to 96.22 million tons.

But the price for grain and food will not rise for a long time or by a large margin, Zhang said.

The price rise also should not trigger a new round of inflation, he said.

The increased supply capacity should restrict consumer prices from rising too much, he said.

The inflation in 1993-95 was mainly because of the lack of basic products resulting from weak agricultural and industrial bases, he said.

At that time, the supplies of food, raw materials and electrical power fell short of demand, and the prices for those products rose quickly.

Since the mid-1990s, the country's economy has emerged from the supply bottleneck.

A study by the Ministry of Commerce on the supply and demand situation of the country's 600 major products suggests that no products should fall short of supply this year.

"More importantly, the foundation for supply growth has improved,'' Zhang said.

The country is capable of providing sufficient funding, labour and technology to increase supply capacity, he said.

He added that the reaction of companies to market demand has also quickened.
 
(China Daily November 14, 2003)