Central bank warns of inflation risks in latest monetary report

Updated: 2007-08-09 08:48

China's central bank admitted on Wednesday that the country is coming under increasing pressure from price hikes, and acknowledged inflation risks are "worthy of attention".

The People's Bank of China said in its second-quarter monetary report published on Wednesday that the current rising prices were not solely caused by accidental and temporary factors, adding that inflation risks were on the rise.

It warned that the price hikes of food products could spread to other consumer products.

The report identified four reasons behind the increasing risk of inflation.

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It said prices for grain and meat products would not fall in the short term and uncertainties over the autumn harvest were aggravated by the ongoing drought.

Meanwhile, the demand for grain is increasing from both the public and the bio-fuel industry.

The meat prices would probably continue to rise in the long term owing to the rising feeding costs and the short supply, which would not be replenished in the short term due to the breeding cycle of pigs, and the price hikes of meat could easily spread to other food products, the report said.

Prices of energy and resources are under pressure as the world petroleum price has climbed to an even higher level and the domestic pricing reform of resources and the country's environmental protection efforts would also push the prices higher, it said.

The report also said labor costs were rising which would eventually raise the prices of consumer products.

People's anticipation of inflation had been enhanced, and it would put further pressure on price hikes, according to the report.

A survey by the central bank in the second quarter showed that 40.2 percent of those interviewed, the second highest record since1999, said they were worried about inflation.

China's consumer price index (CPI) rose 3.2 percent in the first half of this year, and the growth rate was 1.9 percentage points higher than the year-earlier level.

Price hike for foodstuffs, mainly grain, meat and fowl and eggs, contributed significantly to the rise. Statistics show that foodstuff prices rose 7.6 percent, with grain price up 6.4 percent, egg price up 27.9 percent and prices for meat and fowl as well as related products up 20.7 percent in the first half.

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