China must set policy mix to curb inflation
By Wang Yanlin |
December 3, 2010, Friday
|
Print Edition
Print Edition
CHINA must launch a mix of policies if it is to curb inflation in the long run, a leading research unit said yesterday.
The agriculture sector should receive support to stabilize supply, suggested the State Information Center, a research unit under the National Development and Reform Commission, China's top economic planning agency.
Other initiatives suggested in a report from the center include accelerating reform of income distribution and regulating the price of natural resources.
Measures introduced in the past two months have mostly targeted curbing short-term price volatility, and must be combined with policies offering lasting effects, it said.
China's Consumer Price Index, the main gauge of inflation, surged to a 25-month high of 4.4 percent from a year earlier in October.
Efforts to cool price advances have been stepped up, and include harsher punishment for speculation, exemption from road toll fees for some agricultural products and providing subsidies for poor families.
"These measures can only curb price jump temporarily," said Wang Yuanhong, an economist at the center. "More initiatives are required to secure the fruits of these short-term policies."
On the issue of income distribution, the report suggested that farmers should be better rewarded. The current system sees most gains from price hikes flow into the pockets of vendors and distributors, leaving producers to bear rising production costs.
"If farmers become disillusioned and lose the incentive to produce, it creates a big threat to the supply of goods," Wang said.
The report said more subsidies should be offered to farmers, and the crackdown on speculative behavior should continue to guarantee a healthy market order.
Inflation may continue to rise in the coming months as input costs at the factory gate climbed to a 28-month high in November - with the component index under the official Purchasing Managers' Index standing at 73.5 percent.
The report also said the macroeconomic policy focus next year will shift to "stabilizing growth" from the current emphasis on "stimulating growth."
This is in line with market projections of the result of a crucial economic meeting to be held next week.
China may make an official announcement to tighten its monetary policy stance in the Central Economic Work Conference later this month, earlier reports predicted.
The annual meeting may increase the target for inflation for next year to 4 percent from this year's 3 percent, and establish an annual target of new yuan lending at 7 trillion yuan (US$1.05 trillion), a decrease from this year's 7.5 trillion yuan.
The agriculture sector should receive support to stabilize supply, suggested the State Information Center, a research unit under the National Development and Reform Commission, China's top economic planning agency.
Other initiatives suggested in a report from the center include accelerating reform of income distribution and regulating the price of natural resources.
Measures introduced in the past two months have mostly targeted curbing short-term price volatility, and must be combined with policies offering lasting effects, it said.
China's Consumer Price Index, the main gauge of inflation, surged to a 25-month high of 4.4 percent from a year earlier in October.
Efforts to cool price advances have been stepped up, and include harsher punishment for speculation, exemption from road toll fees for some agricultural products and providing subsidies for poor families.
"These measures can only curb price jump temporarily," said Wang Yuanhong, an economist at the center. "More initiatives are required to secure the fruits of these short-term policies."
On the issue of income distribution, the report suggested that farmers should be better rewarded. The current system sees most gains from price hikes flow into the pockets of vendors and distributors, leaving producers to bear rising production costs.
"If farmers become disillusioned and lose the incentive to produce, it creates a big threat to the supply of goods," Wang said.
The report said more subsidies should be offered to farmers, and the crackdown on speculative behavior should continue to guarantee a healthy market order.
Inflation may continue to rise in the coming months as input costs at the factory gate climbed to a 28-month high in November - with the component index under the official Purchasing Managers' Index standing at 73.5 percent.
The report also said the macroeconomic policy focus next year will shift to "stabilizing growth" from the current emphasis on "stimulating growth."
This is in line with market projections of the result of a crucial economic meeting to be held next week.
China may make an official announcement to tighten its monetary policy stance in the Central Economic Work Conference later this month, earlier reports predicted.
The annual meeting may increase the target for inflation for next year to 4 percent from this year's 3 percent, and establish an annual target of new yuan lending at 7 trillion yuan (US$1.05 trillion), a decrease from this year's 7.5 trillion yuan.
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