Chinese Online Class - CPI to rise at moderate rate, still under control

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BIZCHINA / Center

CPI to rise at moderate rate, still under control

(Xinhua)
Updated: 2007-08-16 14:17

A Chinese national research center said on Wednesday that the consumer
price index (CPI) is still within government control although it will
"keep rising at a moderate rate for a relatively long time".

Recent price hikes signaled moderate inflation only, in which the prices
rise steadily at a relatively low rate. Inflation was not high nor out of
control, said the State Information Center (SIC).

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SIC research into the CPI changes in the past two decades suggested that
a growth rate of five percent was the threshold for moderate inflation in
China, well above the accumulative 3.5 percent CPI growth in the first
half.

Although the threshold was exceeded by the 5.6-percent growth in July,
inflationary pressure was not severe compared with similar accelerated
price hikes in 2004, in which the CPI rose by at least five percent for
four straight months from June to September.

If accelerated CPI growth occurred, the government could still
effectively rein the prices through policies such as the suspension of
government-controlled price rises, said the SIC.

The SIC attributed the pressure for further prices hikes to future growth
in food and housing prices.

Food price increases would likely last sometime because of tight domestic
supply market and soaring international food prices, which rose 20
percent in the first four months, SIC quoted from a World Bank report in
May.

Housing prices, accounting for 13.2 percent of the CPI, had increased by
four to five percent since 2005 because of soaring demand.

Large salary increases for government workers last year, together with
the booming stock and real estate markets, boosted domestic demand, which
would drive up prices overall, the SIC said.

The SIC forecast the CPI growth at around four percent in 2007, higher
than the three-percent goal set at the beginning of the year.

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