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China's Inflation Eases Slightly, Pressure Remains High
Oct 17,2011 10:43CST
industry news
Source:SMM
China's Consumer Price Index (CPI) in September dipped slightly from August to 6.1 percent, indicating its inflation eases slightly, while pressure remains high.

BEIJING, Oct. 17 (Xinhuanet) - China's Consumer Price Index (CPI) in September dipped slightly from August to 6.1 percent, indicating its inflation eases slightly, while pressure remains high.

It is the second month that China's inflation continued to ease from a 37-month high peak in July, the National Bureau of Statistics (NBS) of China made the remarks on Friday.

Yao Jingyuan, a former chief economist of the NBS predicted in September that China's CPI growth is to slow down in the coming months, while he assured no optimism towards the easing of the whole inflation picture.

FOOD PRICES DIPS SLIGHTLY

September's CPI rocketed to 6.1 percent year-on-year, mainly fueled by food prices which accounted for nearly one-third of the basket of goods in the nation's CPI calculation.

The growing speed of food prices slowed slightly, due to sufficient harvest supply in autumn and the dim economic outlook in the U.S. and the Eurozone.

Liu Yuanchun, a professor at the School of Economics of the Renmin University of China, explained that the slightly ease in food price is mainly caused by grain harvest, a drop in international commodity demands, and the recovery slowdown in the global economy.

INFLATION PRESSURE REMAINS HIGH

Although the growth of the food prices eased slightly in September from the highest peak, it still increased 13.4 percent, the same as the previous month, and adding 4.1 percentage points to the overall increase.

China's inflation pressure will remain high in the following months, against the background of high global inflation pressure especially in other BRIC nations.

India's inflation rate remained above 9 percent at the end of September and in Russia, Prime Minister Putin promises investors that the inflation rate would not exceed 7 percent this year.

Zhang Liqun, a researcher in the Development Research Center of the State Council, or China's Cabinet, estimated that for the whole year, China's consumer price will grow by 5 percent, one percentage point higher than the government's target and half percentage point higher than the IMF's prediction.

POLICY TO REMAIN ON HOLD

Despite the downward trend, many believe the policies to curb inflation will be tightened in spite of the pressure from U.S. Senate's currency bill, as the crises in the U.S. and the Eurozone threaten global economic recovery.

"We think inflation is to slowdown gradually in the coming months," predicted Chi Sun, an economist with Nomura in Hong Kong, "Policy will be on hold."

CEMB's Qiao Yongyuan warns it is too early to confirm an easing trend in price pressures and that inflation would be no longer a worry, "The slowdown in the CPI last month is not drastic enough to reduce inflationary expectations."

To curb the ongoing inflation, China's central bank has raised the benchmark interest rates five times since a full year ago and increased the reserve requirement ratio six times this year.

Some factors that drive prices upward have been contained but not eliminated, while inflation remains relatively high, the central bank said in a statement on its website last month. Therefore, stabilizing the overall price levels remains the top priority of macro-economic regulation.

CPI

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