Keep inflation in check

(China Daily)
Updated: 2007-12-12 13:34

The jump in the consumer price index (CPI) by 6.9 percent year on year in November, the highest level in more than a decade, well justifies Chinese leaders' recent decision to make curbing inflation a top priority next year.

However, to achieve that goal, it is high time to come up with clear-cut policies that respond to the different causes of price increases.

Currently, soaring food prices remain the prime driving force of consumer price inflation.

Latest statistics show that food prices ballooned 18.2 percent in November from a year earlier, compared with 17.6 percent in October. Because food accounts for one-third of China's CPI, food price hikes alone pushed up the November CPI figure by almost 6 percentage points.

The prices of certain staple food items have shot up very rapidly. For instance, the price of cooking oil and pork soared 35 percent and 56 percent respectively year on year last month.

It is certainly an urgent task to increase the supply of such food items to stabilize the market. The government has indeed adopted a lot of measures to encourage farmers to produce more.

But in the fight against climbing inflation, it is unwise to believe that the acceleration of overall price gains in the country will be temporary simply because food price inflation used to be cyclical and might prove so this time.

Actually, the rising CPI figures in recent months have been running contrary to earlier predictions that it would steadily fall.

Now, there are already new signs that inflation might have found other ways to creep in.

Surging crude oil prices pushed up China's producer price index (PPI) by 4.6 percent year-on-year in November, the largest one-month increase in more than two years. Higher prices at the producer level could add pressure to the country's rising consumer prices.

As the consumer price index increase reached 4.6 percent for the first 11 months, far overshooting the official target of 3 percent for the year as well as the one-year saving interest rate of 3.87 percent, policymakers should prepare to strike at the root of inflation with comprehensive policy responses.

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