China's government should continue taking measures to prevent
"structural price rises" from becoming "obvious inflation", said
Wang Yiming, an expert from the National Development and Reform
Commission (NDRC), in an article published by Xinhua News
Agency.
Wang, vice president of the Macro Economy Research Institute of
the NDRC, described recent price hikes as within an "acceptable"
range compared with international levels, because it was less than
five percent and other countries had also seen big CPI rises last
year.
Surges in prices of staples such as pork, cooking oil and grain
since May 2007 lifted the country's consumer price index (CPI) to
4.8 percent in 2007, well above the government's three-percent
target set at the beginning of last year.
In November when China saw a CPI rise of 6.9 percent, the
highest in 11 years, the CPI increase in Russia was 11.1 percent,
Vietnam 10 percent, Indonesia 6.7 percent, India 5.5 percent, U.S.
4.3 percent, Brazil 4.2 percent year on year, mainly pushed by
energy, resources and foodstuff prices.
"Easing inflationary pressures needs a process and price rises
will continue for some time this year," Wang said.
The government should tighten price supervision of daily
necessities and provide assistance to low-income families to ride
out the price rises.
Wang also suggested that the government should strengthen
tracking and research of global prices of grain, energy and other
important products to facilitate the decision making in domestic
macroeconomic controls.
The NDRC, China's top economic planner, in mid January announced
price caps on a range of products, including grain, edible oils,
meat, milk, eggs and liquefied petroleum gas.
Food producers were required to get government permission for
any new price hikes. Last week, the government extended the order
to fertilizer prices in order to cushion the impact on farmers.
A recent clampdown had reduced liquefied petroleum gas (LPG)
retail prices by 19 percent in major Chinese cities.
The move was another effort taken by the government after the
temporary price freezes on gasoline, natural gas, electricity,
water, heating and urban public transport fees.
China's leaders made it clear at the annual central economic
conference in December that curbing economic overheating and
inflation was their highest economic priority in 2008.
"Taking effective measures to stabilize commodity supply and
regulate the market order is crucial for maintaining the country's
economic growth momentum and social stability," said Wang.
Wang pointed out food prices rose 12.3 percent in 2007 year on
year, which contributed to 85.4 percent of the CPI rise, or 4.1
points on the CPI surge, while non-food price increases only
accounted for 0.7 points of the 4.8 point CPI rise.
In particular, the average pork price nationwide rocketed 48.3
percent in 2007 from a year earlier, driving up the CPI increase by
1.5 points.
"The pork price was underestimated in 2006, which resulted in a
sharp decline in the number of pigs, especially sows. The shortfall
was aggravated by a pig cull after a serious outbreak of blue-ear
disease last year," said Xie Fuzhan, director of the National
Bureau of Statistics.
"The cause of rocketing prices is overheating and excess
liquidity," said Lin Songli, a macroeconomic analyst at
Guangzhou-based Guosen Securities.
China's central bank, the People's Bank of China, used six
interest rate hikes and 11 reserve requirement ratio increases
since last year to tighten monetary supply. On Jan. 25, the reserve
requirement ratio rose by half a percentage point to 15 percent,
the highest in 24 years.
China's grain output exceeded 500 million tons in 2007, and the
inventory of major farm products including wheat, rice and maize is
enough to meet domestic market demand, Wang said.
"More than 70 percent of industrial products and more than 80
percent of consumer goods are oversupplied in the market. The price
hikes have been confined only to shortages of a few items," he
added.
If the government could take effective measures to cushion
short-term price rise factors and increase supply, prices would
stabilize, he said.
(Xinhua News Agency January 30, 2008)
