(Xinhua)
Updated: 2008-06-10 14:00

"The current cycle has not ended yet. We are forecasting a new trough, which we think won't be too low."

Over the mounting inflationary pressure, Xu told the weekly the inflationary peak point of the current economic cycle was expected to show up in 2009, two years after the appearance of the growth peak.

"This year, we are facing a very severe situation in terms of inflation. In fact, we expected the inflation rate to drop in the second quarter but it didn't happen."

According to Xu, it was probable that the drop of the inflation rate would be further delayed in the wake of the May 12 8.0-magnitude earthquake that rocked the southwestern Sichuan Province and had killed 69,142 people as of Monday noon.

"We should pay the utmost attention to inflation. If the inflation rate reaches the peak one or two years later from now, the Chinese economy would be under huge pressure."

Last week, the Institute of Finance Research under the People's Bank of China (PBOC) said in a report that the Chinese economy had slowed because of the US credit crunch, a spate of tightening measures and natural disasters.

Consumer prices were high, making the fight against inflation arduous, the report said. "The pressures for broad-based price rises are still the biggest risk for the macro-economy."

The consumer price index (CPI) rose 8.2 percent in the first four months from a year earlier, the highest in 12 years and above the government target of 4.8 percent for 2008.

The high inflation came amid high commodities prices, normal rises of China's once-low resources and labor costs and economic structural imbalances.

Inflationary pressure would be heavy for the whole year as prices of commodities and food had further room to rise. There would be increasing demand for credit in the post-quake period, the report noted.

"The government should stick to tightening policies to prevent excessive credit growth and thus provide a relatively tight environment to constrain total demand and stabilize prices," it said.

It also suggested the authorities pursue pricing reforms for resources in the medium and long term to ease price pressures caused by the extensive growth mode and excessive consumption of resources.

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