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China should care about inflation and deflation
(chinadaily.com.cn )
Updated: 2004-03-21 10:12
China should not ignore deflation while preventing the risk of inflation in
2004 as the current rising Consumer Price Index (CPI) is unsustainable, Yao
Jingyuan, chief economist with the National Bureau of Statistics （NBS
), said in Beijing Saturday.
The higher CPI in the previous two months, which stood at 3.2 per cent - the
biggest in nearly seven years, increased worries for both government officials
and economists who thought the country's economy might overheat.
Supply
still exceeds demand overall in China's market, in which, despite a rising food
price, the price of industrial products declines and the price of service
remains stable, Yao said when addressing a forum on China's balanced
development.
The grain price rose in the fourth quarter of 2003 mainly because of a grain
shortage in the market, Yao said. China's grain production has been decreasing
since 1998 due to a price drop then, and the situation became more serious last
year due to floods and droughts.
But the price rise of grain would not last long, for both the government and
the market price encourage the farmers to plant more grain this year, he
said.
China's urban fixed investment during the January-February period
soared by 53 per cent on a year-on-year basis, which compares to 26.7 per cent
recorded last year.
But over-investment was found in the steel, cement,
aluminium as well as real estate and auto sectors as banks lent aggressively to
tap the growth momentum.
Restrained by consumption, the price increase of raw materials like steel
would not transmit to end products smoothly either, he said, taking the
declining price of cars as an example.
Yao also mentioned the factors restricting inflation in China in 2004,
including the shift of China's economic development mode from speed-oriented to
a more balanced one, the slow growth of the residents' income and the large
unemployed population, the increasingly free competition in China's market, and
the general declining trend of the world CPI.
People's Bank of China's
(PBOC) Governor Zhou Xiaochuan said earlier the government should be alert to
possible inflation， but Zhou said the central bank chose not to raise the
interest rate this month, because inflation was still mild。
Story contributed by Xinhua
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