China inflation to peak in summer: economist

Updated: 2010-05-31 16:35
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BEIJING: Chinese inflation will peak this summer, a respected economist said, as a top planning official pinpointed decreased land supply and the rising cost of agricultural labor as driving strong prices of Chinese agricultural commodities.

Ha Jiming, chief economist at China International Capital Corp, forecast China's consumer price index would increase 3.2 percent in May from a year earlier, the Xinhua news agency said on May 30.

CPI annual growth rate could peak at 4 percent in June and July, Ha told an investor conference in Beijing.

The CICC has cut its estimate for China's economic growth this year to 9.5 percent from 10.5 percent, Ha said.

But interest rate hikes would be unlikely this year as growth in consumer prices was expected to fall in the second half, he said, according to Xinhua.

Chinese vegetable and grains prices have been strong in recent months, propped by a cold spring and drought in the southwest. High corn prices could attract the largest volume of imports since 2001, traders have said.

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Speculative funds looking for new investment channels as the stock market falls and tightening measures hit the property markets are partly responsible for the inflation expectations, Peng Sen, deputy director of the National Development and Reform Commission, told Xinhua in a separate interview on May 30.

The government last week announced measures, including monitoring prices, punishing "irregular" trading activities, and increasing supply to agricultural markets, to cool prices.

Peng reiterated the government inflation target of 3 percent for this year, saying that even a surge in prices of certain products like garlic or mung beans would have a limited impact on overall inflation.

Food prices, including meat, account for one third of China's CPI basket.