Chinese Mandarin - CPI to rise 3.3% in 2007

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BIZCHINA / Macro Economy

CPI to rise 3.3% in 2007

(Reuters)
Updated: 2007-06-20 09:14

China's consumer price index is expected to rise about 3.3 percent in
2007, moving above the government target of?three percent, the State
Information Centre said on Wednesday.

The forecast came after China's consumer price index (CPI) hit a
27-month-high of 3.4 percent in May, driven by an 8.3 percent rise in
food prices, from 3.0 percent in April and 3.3 percent in March.

"Consumer inflation in 2007 is to be pushed up by food price increases,
and food price increases are the result of a surge in meat, poultry and
egg prices," the think-tank said in a report published on the China
Securities Journal.

The centre is a research body under the China National Development and
Reform Commission, China's top planning agency.

The report said the rise in meat and other foods would not slow
considerably until the last quarter of this year because of high grain
and cereal prices.

But it did not provide any forecast on policy moves.

A surge last month in the price of pork, a staple meat on Chinese dinner
tables, raised concerns about inflation. After the May inflation data was
released last week, Premier Wen Jiabao said the government was prepared
to tighten policy further to restrain the economy and inflation.

Various ministries also scrambled to respond in an effort to ease public
worries about inflation. The Ministry of Commerce said pork prices in
major Chinese cities had dropped slightly in the first 10 days of June.

But according to the report, meat and egg prices could rise even further
in coming weeks, following a 26.5 percent surge in meat prices in May.

Besides food, inflation pressures are under control, the report said.

Prices of industrial products are unlikely to rise significantly, and
labour cost increases in China have yet to be reflected in consumer
inflation.

It said the pace of inflation in 2007, although it is exceeding Beijing's
target, is still within a range the government can control. Monetary
tightening and yuan appreciation in China are expected to have some
cooling effects on inflation.

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