Inflation, wages top concerns

By Xin Zhiming (China Daily)
Updated: 2007-09-21 08:58

Inflation is expected to continue rising in the fourth quarter alongside mounting wage uncertainties, according to a central bank survey of 20,000 Chinese households last month.

Meanwhile, business leaders and bankers are growing more concerned about the economy overheating, predicting more tightening measures may be in the pipeline, according to two separate central bank surveys for the third quarter.

About 61 percent of the respondents in 50 cities across China said they expect consumer prices to rise further, according to a quarterly survey by the People's Bank of China.

The survey, published on the central bank's website yesterday, shows 47.1 percent of respondents said prices are too high, while only 3.5 percent of those surveyed believe prices are at a satisfactory level.

The consumer price index (CPI) for August accelerated to a 10-year high of 6.5 percent after it hit 5.6 percent in July. The central bank has raised the interest rate for the fifth time this year, partly to ease concern about a negative real interest rate on bank deposits.

China's CPI is set to break the 4-percent mark this year, but it's unclear how near it will get to 5 percent, said Hu Shaowei, a senior economist with the State Information Center.

"It is normal for the public to respond strongly to a survey like this," he said. "The commodities that have risen sharply affect day-to-day life."

Consumers are feeling the pinch in the latest round of price rises, in which food and grains have surged by the biggest margins.

But income prospects are adding to concerns. The income expectation index fell to 21 percent from 32.1 percent in the first quarter of the year. And 10.2 percent of those surveyed said they couldn't predict earnings for the coming quarter - the highest level in three years.

The central bank also said confidence among company executives and bankers fell in the third quarter on concern the economy may continue to boom and become overheated.



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