ABAC: Chinese Economy Expects Strong Growth Due to Increased Inflation Pressure

GUANGZHOU, Feb. 16 -- According to an economic outlook report from an Asia Pacific Economic Cooperation (APEC) business advisory body, China's economy is expected to remain strong in 2011, but inflationary pressures are likely to rise further due to rising food prices.

According to the report, Chinese authorities are looking to ensure that the inflationary pressures do not "spill over" into price pressures in other areas of the economy or into inflationary expectations, which may lead to further cuts in lending quotas and more hikes in reserve requirements and interest rates.

John Denton, the chair of the Finance and Economics Working Group of the APEC Business Advisory Council (ABAC), presented the report.

The organization, which opened its first meeting this year in China's southern city of Guangzhou, has been assigned to prepare topics for discussion with APEC leaders when they convene in Hawaii later this year.

China's consumer price index (CPI), which is a main gauge of inflation, rose 4.9 percent year on year in January. The increase was 0.3 percentage point higher than the December figure from last year. However, the figure is 5.1 percent lower than in November, which was a 28-month high.

China's robust growth in household spending, manufacturing investment and exports will offset a slowdown in property-related and urban fixed-asset investments. The decline was partly induced by government measures designed to cool "overheated" real estate markets, said the report.

Due to the Chinese government's mandate for increasing minimum wages and the upward pressure on other wages and salaries due to emerging labor shortages, the report predicted continuous growth in household spending from rapid income gains in coastal provinces and other areas.