Despite fears that China may see a period of deflation in 2009, a December 12 - 13th conference of the National Development and Reform Commission and directors of price control bureaus has set a preliminary 2009 Consumer Price Index (CPI) target higher than the 2007 target of 3 percent.

An official who attended the session told 21st Century Business Herald the CPI target would be somewhere in between the between 2007 target of 3% and the 2008 target of 4.8%, with many expecting the final target to be 4%.

With most economists predicting consumer price inflation of less than 2 percent, and some even foreseeing a period of deflation, officials said the higher than expected target is intended to leave room for price reform in some industries. Peng Sen, the deputy director of National Development and Reform Commission said that with the prices of agricultural products, labor power and land on a long-term upward trend, contradictions in the supply of electricity, gas, water and public services need to be urgently addressed.

Peng Sen said the aim must be to maintain the rapid and stable economic development and avoid price excessive fluctuations. In order to avoid deflation price reforms will be carried out, including raising grain prices, launching a fuel tax reform, and levying a resources tax.

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(China.org.cn December 17, 2008)