Inflation 'able to be controlled'
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Shanghai Daily, June 27, 2011
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China's consumer price index rose to a 34-month high of 5.5 percent in May, 2011. |
The former chief economist with China's National Statistics Bureau says the country should be able to control inflation to around 4 percent this year despite difficulties.
China's inflation is driven by the high price of imports and the over-supply of money domestically, Yao Jingyuan, former chief economist of the National Statistics Bureau, said during a financial forum in Shanghai.
China extended a total of 17.6 trillion yuan (US$2.7 trillion) of yuan-backed loans in 2009 and 2010 to counter the global financial crisis. But the flood of liquidity has led to asset price bubbles and triggered inflation worries.
However, the government's tightening monetary policies were taking effect, laying the groundwork to put inflation under control, Yao said.
"The tightening measures should continue to consolidate the controls on inflation," he said.
China has raised interest rates four times since October to curb inflation and the People's Bank of China has raised the reserve requirement ratio six times this year to siphon capital from the market and ward off credit-driven inflation.
New yuan loans totaled 3.6 trillion yuan in the first five months of this year, down 12 percent from the same period of last year.
Yao said China was equipped to win the fight on inflation.
China's ample grains reserves and the over-supply of industrial products meant price rises could be limited, he said.
The consumer price index rose to a 34-month high of 5.5 percent in May. Economists are projecting a June inflation of above 6 percent.
Yao said inflation may recede in this year's fourth quarter.
Yao was echoing earlier comments by Premier Wen Jiabao. In an article in the Financial Times on Friday, Wen said China could both control inflation and sustain steady economic growth.
"There is concern as to whether China can rein in inflation and sustain its rapid development. My answer is an emphatic yes," Wen wrote.
A central bank survey earlier this month found 68.2 percent of respondents felt prices were too high, a 1.3 percentage points rise on the first quarter.
