China's consumer price index (CPI) grew 4.1 percent in the first nine months of this year, compared with the same period of 2006, said Chen Deming, vice chairman of the National Development and Reform Commission (NDRC) at a meeting of the 17th National Congress of the Communist Party of China yesterday.
The core CPI, a product of general CPI deducted of seasonal factors such as food and energy prices, considered a more precise gauge measuring inflation, grew 0.8 percent year on year during the period, Chen added.
The 4.1 percent January to September CPI growth rate is higher than the 3.9 percent for the first eight months, 3.5 percent for the first seven months, and 3.2 percent for the first six months this year. It is also much higher than the 3 percent macro-control target set by the government for the year.
In August, CPI grew at a 128-month high of 6.5 percent after a 10-year record for monthly growth in July of 5.6 percent. The high CPI figures have triggered inflation worries in both commercial and academic fields. But another vice chairman of NDRC, Bi Jingquan, said there has been no sign of severe inflation.
Bi explained that although the January to July CPI rose 3.5 percent, the major drives for the growth were from the rise in food prices. Prices of other CPI components have fluctuated in different directions’.
In general, there has been no overall price increase caused by significant imbalance of aggregate demand and supply. In addition, the fast CPI growth is supported and justified by robust economic growth, Bi said. Price changes are still in a "controllable" range, he concluded.
An earlier report by Goldman Sachs predicted China's CPI would slow slightly but still remain high in September. It estimated the September CPI would grow 6.3 percent year on year, lower than the 6.5 percent for August.
The regulators are likely to implement further tightening macro-control policies to address the inflation problem, curb excessive liquidity, and restrain commercial bank loans, the report said.
In its latest statement, the central bank announced on Sunday it will move to raise banks' reserve requirement ratio, or the amount lenders must hold in reserve, for the eighth time this year. The ratio would go up by 0.5 percentage points to 13 percent as of October 25.
The adjustment is estimated to absorb 170-180 billion yuan (US$21-23 billion) in liquidity and puts the current ratio on par with the historical high, during the 1988-98 period.
(Chinadaily.com.cn October 17, 2007)
