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Agricultural prices rising
By Zhang Dingmin (China Daily)
Updated: 2004-03-17 08:30

China's major agricultural prices and industrial output continued to rise rapidly last month, showing little signs of a price downturn to soothe persistent inflationary worries.

The National Bureau of Statistics (NBS ) said on March 16 that grain prices continued their upward trend in February, with wheat, corn and soybean rising by 19.9, 21.5 and 31.4 per cent respectively on a year-on-year basis, all faster than the pace recorded in the previous month.

Cotton prices rose by 41.7 per cent from a year earlier and were 0.7 percentage points faster than in January.

The persistent price hikes in cotton were a result of a widening shortage of supply, the bureau said, as factors like unfavourable weather conditions reduced output while demand continued to surge on the rosy prospects of textile exports.

A Chinese farmer harvests corn in the field.[AFP/file]
Prices in vegetables and fruits dropped on a broad basis, with 2004 supplies growing gradually as the weather gets warmer and consumption abated after the Lunar New Year.

Also yesterday, the NBS said that industrial value-added goods grew by 23.2 per cent in February. The growth in the first two months was reported at 16.6 per cent, which compares to an average of 17 per cent last year.

"The situation is fairly similar to what we expected, and is just normal," said Zhang Liqun, a senior analyst with the Development Research Centre (DRC), a think-tank under the State Council.

Grain prices are likely to maintain their upturn which started last year and stabilize when summer grain hits the market, he said. The grain is expected to come in larger quantities due to wider planting areas.

Accelerating prices in the second half of last year and this year have prompted worries about inflation and discussions of an interest rate rise, although central bankers have said they need to keep watching price trends and wait to see what are the lagged effects of last year's policy moves.

Wang Yuanhong, a senior analyst with the State Information Centre, said the prospect of an interest rate hike this year largely depends on whether the consumer price index (CPI), which came in at 3.2 per cent in January, maintains its momentum in the coming months.

A hike could also depend on whether the effects of last year's monetary policy actions turn out to be strong enough to curb rapid credit growth.

Despite the continued price acceleration in the first two months, Zhang said he expected CPI to stay at around 3 per cent this year as growing aggregate supply will cool down prices.

"Supply is growing fairly well," he said, citing the rapid increases in steel output and power generation as well as excessive supply for some industrial products.

The prices of grain, which account for about one-third of China's CPI, are also expected to fall later this year as farmers sow more seeds in pursuit of higher prices.

"So the rise in grain prices will not last for too long," Zhang said.

The bird flu outbreak still had some effect on poultry prices in February, the bureau said, but the impact is subsiding due to government measures to help increase supplies.

Prices of live chickens last month fell by 11.1 per cent from January, while those for eggs dropped by 5.8 per cent, the bureau said.

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