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BIZCHINA / Center

China's inflation to surpass 3% for full year

By Zhang Ran (China Daily)
Updated: 2007-08-30 09:04

This year's consumer inflation is likely to exceed the central bank's
target of 3 percent, a top official said yesterday.

"Given the relatively high inflation in the first seven months of the
year, even if we step up control measures now, the consumer price rise
will still probably be above 3 percent for the whole year," Su Ning,
vice-governor of the People's Bank of China (PBOC), told a news
conference in Beijing yesterday.

"The central bank is paying close attention to changes in prices and will
take further macroeconomic control measures to keep prices stable," Su
said.

Spurred by surging food prices, the consumer price index, a key gauge of
inflation, hit a 10-year high of 5.6 percent in July, up from 4.4 percent
in June. The average inflation in the first seven months rose 3.5 percent
year on year.

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Food prices, which make up about a third of the inflation basket, rose
15.4 percent year on year last month. Prices in the first seven months
rose 8.6 percent from the same period last year.

In a report to the Standing Committee of the National People's Congress,
Ma Kai, minister of the National Development and Reform Commission
(NDRC), said the government will take a slew of measures such as
encouraging pig raising and increasing grain and vegetable supplies, to
curb inflation.

"The government will also strengthen monitoring of prices and step up
efforts to crack down on price cartels and illegal price rises," the
minister said.

In an effort to curb inflation, the central bank last week raised
interest rates for the fourth time this year. The benchmark one-year
deposit rate is now 3.6 percent while the one-year lending rate is 7.02
percent.

"I expect the central bank to raise interest rates for the fifth time at
the end of October," Li Zhikun, senior analyst at China Investment
Securities Co Ltd, told China Daily.

Li estimated inflation in August to be above 6 percent due to the
continuing rise of food prices, and forecast that inflation for the full
year will likely to be around 4.2 percent.

Jun Ma, China economist at Deutsche Bank in Hong Kong, also estimated
August inflation at round 6 percent; and believes the likely timing of
the next rate hike will be in the second half of September.

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