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China should remain on inflation alert: Cheng Siwei
By Wang Yanlin |
April 6, 2012, Friday
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Online Edition
Online Edition
CHINA should remain alert of inflation, and this year's growth will be harder to manage than 2009 when the global economic crisis was in full swing, said renowned economist Cheng Siwei in Shanghai today.
"Inflationary pressure has shown signs of receding, but it is far from risk-free," Cheng, former vice chairman of the Standing Committee of the National People's Congress, said in a lecture at Fudan University. "When China's housing market and stock market are both weak, speculative money tends to flow into the real goods market and bolster consumer prices."
Partly thanks to a robust property market in 2009 when housing prices surged more than 40 percent, along with a comparatively bullish stock market, the country's consumer prices were kept low and stable two years ago due to controlled liquidity in the market, Cheng said.
"The effect of China's large stimulus package during the crisis has not been fully digested, which is also a source of inflation," Cheng added.
Consumer Price Index, the main gauge of inflation, expanded 3.2 percent from a year earlier in February.
China's central government has set a target to control inflation under 4 percent this year 鈥 but Cheng said the country would be lucky to keep inflation growth below 5 percent.
Because of shrinking external demand, insufficient domestic demand, the risk of local government debt and still low-end manufacturing at home, China's economic growth is difficult to manage this year, even harder than in 2009, Cheng warned. He predicted the gross domestic product growth in the world's second-largest economy will be between 8 percent and 8.5 percent this year, the slowest in a decade.
"Inflationary pressure has shown signs of receding, but it is far from risk-free," Cheng, former vice chairman of the Standing Committee of the National People's Congress, said in a lecture at Fudan University. "When China's housing market and stock market are both weak, speculative money tends to flow into the real goods market and bolster consumer prices."
Partly thanks to a robust property market in 2009 when housing prices surged more than 40 percent, along with a comparatively bullish stock market, the country's consumer prices were kept low and stable two years ago due to controlled liquidity in the market, Cheng said.
"The effect of China's large stimulus package during the crisis has not been fully digested, which is also a source of inflation," Cheng added.
Consumer Price Index, the main gauge of inflation, expanded 3.2 percent from a year earlier in February.
China's central government has set a target to control inflation under 4 percent this year 鈥 but Cheng said the country would be lucky to keep inflation growth below 5 percent.
Because of shrinking external demand, insufficient domestic demand, the risk of local government debt and still low-end manufacturing at home, China's economic growth is difficult to manage this year, even harder than in 2009, Cheng warned. He predicted the gross domestic product growth in the world's second-largest economy will be between 8 percent and 8.5 percent this year, the slowest in a decade.
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