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Analysts warn inflation remains China's biggest challenge
By Wang Yanlin |
April 12, 2011, Tuesday
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Online Edition
Online Edition
THE upcoming release of first-quarter and March economic data will provide a good opportunity to diagnose the health of China's overall economy, and analysts are on the whole optimistic, except for inflation.
The National Bureau of Statistics is set to unveil the key economic data this Friday. The spotlight will be on the gross domestic product for the first three months and consumer prices in March.
Wang Qing, an economist at Morgan Stanley, said the first-quarter GDP rate may slow down to 9.6 percent from 9.8 percent a quarter earlier in light of the escalated tightening to control inflation and rein in property prices.
"Economic growth regained momentum in the third quarter of 2010, and the strength extended into the fourth quarter," Wang said. "The growth will stage a comparatively stable advance despite of tighter policies."
China has raised the interest rates twice so far this year. The reserve requirement ratio, the amount of money banks must set aside, was also lifted three times to soak up market liquidity and rein in inflation.
Jing Ulrich, managing director at J.P. Morgan, said the broad picture remains rosy for China when global investors showed renewed interest in emerging markets.
"How to control inflation may be the biggest challenge for China right now," Ulrich said. "We estimated the inflation rate may climb above 5 percent in March, and will continue to expand until June or July."
Consumer Price Index, the main gauge of inflation, settled at an annualized 4.9 percent in January and February, exceeding the government target to control it under 4 percent.
The National Bureau of Statistics is set to unveil the key economic data this Friday. The spotlight will be on the gross domestic product for the first three months and consumer prices in March.
Wang Qing, an economist at Morgan Stanley, said the first-quarter GDP rate may slow down to 9.6 percent from 9.8 percent a quarter earlier in light of the escalated tightening to control inflation and rein in property prices.
"Economic growth regained momentum in the third quarter of 2010, and the strength extended into the fourth quarter," Wang said. "The growth will stage a comparatively stable advance despite of tighter policies."
China has raised the interest rates twice so far this year. The reserve requirement ratio, the amount of money banks must set aside, was also lifted three times to soak up market liquidity and rein in inflation.
Jing Ulrich, managing director at J.P. Morgan, said the broad picture remains rosy for China when global investors showed renewed interest in emerging markets.
"How to control inflation may be the biggest challenge for China right now," Ulrich said. "We estimated the inflation rate may climb above 5 percent in March, and will continue to expand until June or July."
Consumer Price Index, the main gauge of inflation, settled at an annualized 4.9 percent in January and February, exceeding the government target to control it under 4 percent.
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