Wen says 3% inflation rise targeted
By Liu Jie |
March 6, 2010, Saturday
|
Print Edition
Print Edition
CHINA targets a rise in consumer prices of about 3 percent this year, Premier Wen Jiabao said when delivering a government work report at the annual session of the National People's Congress in Beijing yesterday.
The target takes into account the carry-over effects of last year's price changes, price fluctuations of major international commodities, hefty increase of domestic money and credit supply, and consumers' ability to bear price increases, Wen told deputies to the NPC.
The figure compares with a 0.7 percent fall of the Consumer Price Index last year as economic slowdown and lackluster demand drove prices down.
"The 3 percent target is mild, which eases inflation fears in the short run," said Zhuang Jian, a senior economist with the Asian Development Bank.
Ai Dehong, a finance professor of Northeastern Finance University, said fears for inflation are understandable, but not a big worry, since the current supply still outweighs demand.
Wen said the government will continue to implement a proactive fiscal policy and a moderately easy monetary policy to maintain continuity and stability while constantly making them better-targeted and more flexible as circumstances and conditions change.
He noted the government needs to manage inflation expectations well and keep the overall level of prices stable.
As the Chinese economy recovered thanks to the government's stimulus package, CPI returned to positive territory in December, and gained 1.5 percent in January.
Also, the record 9.59 trillion yuan of new loans and a nearly 30 percent jump in broad money supply last year also caused fears of inflation.
To tame the excessive liquidity and potential inflation risk, the government planned a 17 percent increase of broad money supply in 2010, down from last year's nearly 30 percent.
The government targets new yuan loans to fall by one fifth from a record high last year to 7.5 trillion yuan for this year.
Although the full year CPI target is 3 percent, Zhuang estimated the real figure will exceed that and there will be monthly fluctuations.
The CPI is set to grow 4 or 5 percent in the first half of this year as the economic recovery takes hold, but it may slow in the second half due to likely cooling measures, he said.
Qin Xiao, chairman of China Merchants Bank, expected inflation and excessive lending to gradually emerge in China following last year's monetary expansion, so tightening measures are very necessary.
Li Yining, an economist and also a member of the National Committee of the Chinese People's Political Consultative Conference, said the current inflation target sends an alarm, but inflation has not emerged yet.
"If the economic growth accelerates throughout the year, the government should pay close attention to inflation, notably in the second half of the year," Li said.
He noted a moderate interest rate rise is all right to stem excessive liquidity in the capital market, but the increase should not be drastic since a moderately loose monetary policy still takes hold.
Li Daokui, a finance professor of Tsinghua University, forecast an interest rate rise before June when the CPI exceeds 3 percent.
The target takes into account the carry-over effects of last year's price changes, price fluctuations of major international commodities, hefty increase of domestic money and credit supply, and consumers' ability to bear price increases, Wen told deputies to the NPC.
The figure compares with a 0.7 percent fall of the Consumer Price Index last year as economic slowdown and lackluster demand drove prices down.
"The 3 percent target is mild, which eases inflation fears in the short run," said Zhuang Jian, a senior economist with the Asian Development Bank.
Ai Dehong, a finance professor of Northeastern Finance University, said fears for inflation are understandable, but not a big worry, since the current supply still outweighs demand.
Wen said the government will continue to implement a proactive fiscal policy and a moderately easy monetary policy to maintain continuity and stability while constantly making them better-targeted and more flexible as circumstances and conditions change.
He noted the government needs to manage inflation expectations well and keep the overall level of prices stable.
As the Chinese economy recovered thanks to the government's stimulus package, CPI returned to positive territory in December, and gained 1.5 percent in January.
Also, the record 9.59 trillion yuan of new loans and a nearly 30 percent jump in broad money supply last year also caused fears of inflation.
To tame the excessive liquidity and potential inflation risk, the government planned a 17 percent increase of broad money supply in 2010, down from last year's nearly 30 percent.
The government targets new yuan loans to fall by one fifth from a record high last year to 7.5 trillion yuan for this year.
Although the full year CPI target is 3 percent, Zhuang estimated the real figure will exceed that and there will be monthly fluctuations.
The CPI is set to grow 4 or 5 percent in the first half of this year as the economic recovery takes hold, but it may slow in the second half due to likely cooling measures, he said.
Qin Xiao, chairman of China Merchants Bank, expected inflation and excessive lending to gradually emerge in China following last year's monetary expansion, so tightening measures are very necessary.
Li Yining, an economist and also a member of the National Committee of the Chinese People's Political Consultative Conference, said the current inflation target sends an alarm, but inflation has not emerged yet.
"If the economic growth accelerates throughout the year, the government should pay close attention to inflation, notably in the second half of the year," Li said.
He noted a moderate interest rate rise is all right to stem excessive liquidity in the capital market, but the increase should not be drastic since a moderately loose monetary policy still takes hold.
Li Daokui, a finance professor of Tsinghua University, forecast an interest rate rise before June when the CPI exceeds 3 percent.
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