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Expert: Inflation unlikely in China
(Chinadaily.com.cn)
Updated: 2004-12-07 11:34

A financial expert said he sees no grounds or possibility for soaring inflation this year or the next as China¡¯s economy, though growing fast, is developing on a healthy track.

Against the backdrop of anxiety about the upsurge of consumer price index (CPI) from the public, Li Yang, director of the Financial Research Institute under the Chinese Academy of Social Sciences, assured that China is unlikely to suffer from comprehensive inflation at present.

Generally, inflation is considered possible when the CPI reaches over 5%.

In the first 10 months this year, China¡¯s CPI hovered around 4.1% on average, according the National Bureau of Statistics, and the index is likely to remain at a similar level or slightly higher in the last quarter this year.

Amidst signs of an overheated economy in China in the past months, some experts have predicted the CPI would continue to be high, and hence predicted a full-scale inflation next year, according to a Beijing Morning Post report.

Li Yang disagreed, and cited the following reasons:

The overheated industries like real estate, steel and raw material characterized by rising prices are now under control through macro-adjustments by the central government. The exorbitant investment growth rate is also curbed. The growth rate of capital investment registered at 53% at the beginning of the year but slid down to 29.7% on average in the first 9 months.

As for price rises, he said, the rise of upstream products like petroleum and steel is much higher than those of downstream products, indicating the effect of price transmission from upstream products to downstream products is not smooth enough.

Furthermore, the wage income showed no sign of obvious ascension this year, eliminating the ground for massive inflation.

The occurrence and acceleration of inflation are usually characterized by alternate rises of price and wages, but this simply does not exist in China, Li explained.



 
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