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China should allow for higher inflation: economist

Updated: 2013-11-08 09:19
( Xinhua)

BEIJING -- China should allow its inflation to rise to give more room for its macroeconomic policies, Lu Ting, chief China economist with Bank of America Merrill Lynch, said Thursday.

Lu told members of the press that the consumer price index, a main gauge of inflation, may rise by a monthly average of 3.3 percent year-on-year in the final quarter.

China's CPI rose 3.1 percent year-on-year in September, slightly higher than the market expectation of 2.9 or 3 percent, data from the National Bureau of Statistics showed.

A 3-percent rise in prices seems to be a psychological threshold for many people, as it may lead to worries about a shift in economic policies, he said.

Lu said a target to hold the country's inflation at around 3.5 percent is a bit too low, and raising it will allow more room for its economic policies.

China has set the target for this year's economic growth at 7.5 percent and inflation at 3.5 percent.

"China's average inflation in the next few years will exceed 3 percent and even near 4 percent," Lu forecast.

Lu attributed the possible rise in CPI partly to hiking labor costs, especially for migrant workers from rural areas who look to find work in cities.

The number of rural migrant workers increased 3.9 percent to 262.61 million by the end of 2012, accounting for 19.39 percent of the country's total population, NBS data showed.

Lu also said that China's economy growth may slow slightly from 7.8 percent in the third quarter to 7.7 percent in the final quarter. He sees a 7.7-percent growth for this year and 7.6 percent for 2014.