Tough price policies could limit rise in inflation to 3.8 percent
By Wang Yanlin |
November 20, 2010, Saturday
|
Print Edition
Print Edition
CHINA'S inflation rate may rise 3.8 percent in the fourth quarter, with strict government policies checking the trend of higher prices, the State Information Center predicted yesterday.
The research unit, which is under the National Development and Reform Commission, China's top economic planning agency, also predicted the country's gross domestic product may expand 8.7 percent from a year earlier in the fourth quarter.
This would be down from the 9.6 percent growth in the July-September period.
"Consumer prices will stabilize," said Fan Jianping, chief economist at the center. "A greater supply of goods, coupled with the government's intensive efforts to combat speculation, will help slow down price growth in the final two months of the year."
The Consumer Price Index surged to a 25-month high of 4.4 percent in October. To keep the increase down to 3.8 percent in the fourth quarter, consumer prices will have to moderate quite steeply in the last two months.
However, that is not completely impossible with the stringent government policies that are already in place, analysts said.
On Wednesday, the Chinese government upped the fight against inflation with administrative price control guidelines and a call to local authorities to offer temporary subsidies for poor families.
Measures included additional support for food production, cutting delivery costs, guaranteeing fuel supplies and cracking down on hoarding. These are intended to ensure market supplies, improve subsidy systems, make price controls more targeted and strengthen market supervision.
Jing Ulrich, managing director and chairman of JP Morgan's China equities and commodities business, said inflation can be controlled.
"Unlike in 2008 when production of pork was slashed due to pig disease, the country reported no major reduction of food supply this year," Ulrich said. "The current inflation issue is a monetary problem."
China has lifted the reserve requirement ratio twice in a month and the benchmark interest rates last month to soak up liquidity.
If the government's latest efforts are effective, consumer prices can be controlled within a level of "a little bit above 3 percent," the center said in the report.
In the first 10 months, China's inflation rate has climbed 3 percent from a year earlier.
The report also said China's economic growth will slow down in the fourth quarter.
China's economy expanded 10.6 percent from a year earlier in the first three quarters. The center said full year growth may be 10 percent.
The research unit, which is under the National Development and Reform Commission, China's top economic planning agency, also predicted the country's gross domestic product may expand 8.7 percent from a year earlier in the fourth quarter.
This would be down from the 9.6 percent growth in the July-September period.
"Consumer prices will stabilize," said Fan Jianping, chief economist at the center. "A greater supply of goods, coupled with the government's intensive efforts to combat speculation, will help slow down price growth in the final two months of the year."
The Consumer Price Index surged to a 25-month high of 4.4 percent in October. To keep the increase down to 3.8 percent in the fourth quarter, consumer prices will have to moderate quite steeply in the last two months.
However, that is not completely impossible with the stringent government policies that are already in place, analysts said.
On Wednesday, the Chinese government upped the fight against inflation with administrative price control guidelines and a call to local authorities to offer temporary subsidies for poor families.
Measures included additional support for food production, cutting delivery costs, guaranteeing fuel supplies and cracking down on hoarding. These are intended to ensure market supplies, improve subsidy systems, make price controls more targeted and strengthen market supervision.
Jing Ulrich, managing director and chairman of JP Morgan's China equities and commodities business, said inflation can be controlled.
"Unlike in 2008 when production of pork was slashed due to pig disease, the country reported no major reduction of food supply this year," Ulrich said. "The current inflation issue is a monetary problem."
China has lifted the reserve requirement ratio twice in a month and the benchmark interest rates last month to soak up liquidity.
If the government's latest efforts are effective, consumer prices can be controlled within a level of "a little bit above 3 percent," the center said in the report.
In the first 10 months, China's inflation rate has climbed 3 percent from a year earlier.
The report also said China's economic growth will slow down in the fourth quarter.
China's economy expanded 10.6 percent from a year earlier in the first three quarters. The center said full year growth may be 10 percent.
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