Inflation goal achievable but tough

Beijing is concerned by rising cost of imported inputs

Reuters
22 March 2010

China’s 2010 inflation goal of 3 per cent is tough but achievable, with good grain supplies and excess capacity helping keep prices down, while growth should hit 8 or 9 per cent, senior government advisers told a conference on Saturday.

The chief economist of the National Bureau of Statistics, Yao Jingyuan, told the China High Level Development Forum that the government was battling a range of forces pushing up consumer prices this year – a key concern in Beijing.

Consumer prices rose 2.7 per cent in the year to February, up from 1.5 per cent in January and flirting with the government’s 3 per cent target for 2010.

More than one in two Chinese savers regard the current inflation rate as unacceptable, according to a central bank survey last Tuesday.

In his comments to the closed-door gathering, carried by the official Xinhua news agency, Mr. Yao said that the challenges for China include the rising costs of imported inputs in a globalised economy, the impact of high inflation forecasts on consumer behaviour, polluting growth and building a greener economy.

‘Achieving this year’s target of keeping the increase in the consumer price index at around 3 per cent will be quite difficult, but . . . it can be achieved,’ Xinhua quoted Mr. Yao as saying.

Ample grain supplies after a good harvest last year would help keep prices in rural areas stable and other prices down, while excess production capacity could also help damp inflation, he added.

Premier Wen Jiabao told a news conference recently that inflation, along with income inequality and corruption, could upset social stability and even undermine the power of the state if it got out of hand.

An adviser to the central bank’s monetary policy committee, Fan Gang, told the forum on Saturday that Chinese economic growth would be 8-9 per cent this year, returning to ‘normal’ next year.

Mr. Fan did not specify what he considered normal, but his forecast for 2010 is moderate compared to the expectations of Western economists.