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Is it too soon to address inflation?

Updated: 2009-08-03 07:54
(China Daily)

Is it too soon to address inflation?

The consumer price index in China fell 1.7 percent in June from a year earlier, according to the National Bureau of Statistics.

The People's Bank of China (PBOC), the country's central bank, projected in July that inflation could bottom out at the end of the third quarter before rebounding.

The bank reported that inflationary expectations were beginning to emerge and that inflationary pressures from imports were also building.

"In the next phase, we should continue to maintain the continuing stability of our macroeconomic policy and consolidate the foundation for an economic recovery," the bank's report said.

The risks for inflation have raised questions about whether China should modify its policies to fight inflation.

Economists and researchers express their views below:

Ben Simpfendorfer, a Hong Kong-based economist for Royal Bank of Scotland

"There has been a flurry of speculation that the People's Bank of China will shortly tighten policy. The trade-off is between growth and asset-price inflation."

Fan Caiyue, researcher at the Economic Research Institute for the National Development and Reform Commission

"If we change our policy stance now, the economic recovery might be halted and there could even be another fall in growth.

An overly early fight against inflation would harm the micro foundations of the economic recovery, especially hurting private investment, which has just begun to rise."

He Jian, deputy director of the Economic and Financial Committee of the National People's Congress

"I do not think there will be inflation in the short term. China needs (annual) price rises of 3 percent to 5 percent for the economy to truly develop healthily."

David Cohen, an economist with Action Economics in Singapore

"For now, like central banks around the world, China's is going to be very patient.

They're not going to risk derailing a recovery by tightening too early."

Wang Qian, an economist with JPMorgan Chase & Co in Hong Kong

"Any possible problem with inflation is a long way away."

(China Daily 08/03/2009 page2)

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