Rising prices for means of production will push up the consumer
price index (CPI), policymakers' key inflation gauge during the
next few months. Xie Fuzhan, deputy director of the State Council's
Development Research Center (DRC), announced the forecast on
Wednesday.
Ren Xingzhou, director of the DRC's Institute of Market Economy,
said the impact of oil and raw materials price increases on the CPI
has already been felt in the first three quarters of 2004. The
government has raised domestic oil prices three times since the
beginning of the year because of high international oil prices.
"The government is likely to raise domestic oil prices further
in the fourth quarter," Ren said.
Coal prices will also stay high as a result of transportation
bottlenecks.
Meanwhile, the country is facing mounting pressure to raise the
prices for public utilities such as water and electricity. The
Beijing local government has already hiked water prices and is
ready to jack up those for electricity, according to Ren.
Local governments in other areas also have plans to increase
utilities prices.
Ren expects the CPI to climb about 4 percent this year.
Ren said grain prices have been a driving force behind the rise
in the CPI in recent months.
Although government efforts to encourage grain production since
the beginning of this year have made headway, a gap remains between
supply and demand.
Analysts believe that grain output for the year will meet the
target of 455 billion kilogram, a rise of 5.8 percent from last
year.
However, existing structural and regional problems in grain
supply will keep prices elevated.
The DRC expects grain prices to jump about 20 percent in the
fourth quarter.
(China Daily November 4, 2004)