The strong economy will not spiral out of control as the
authorities may tighten controls even more to keep it on track,
economists have forecast.
The consumer price index (CPI) surged to 6.5 percent in August,
a 10-year high, triggering worries that it is picking up too much
steam.
The September figure may hover above 6 percent, according to
various forecasts.
But Zhu Baoliang, a senior economist with the State Information
Center (SIC), said: "It will probably stabilize this month and it
may reach 4.3 or 4.4 percent by the year-end."
There is ample supply of most commodities, although food and
housing prices are on the rise, he said, implying the inflationary
pressures will not persist.
A key factor is the price of grain, according to Song Guoqing,
senior economist with Peking University - if it rebounds in the
coming months, it will exert greater pressure on overall inflation,
he said.
As asset prices are driven up by excessive liquidity, they may
ultimately spill over into other sectors, said Zhuang Jian, senior
economist with the Asian Development Bank in Beijing.
But that can be reined in, he said, since government measures
can still play a large role in cooling down prices.
The CPI may reach about 4.2 percent for the whole year with the
proviso that the index not rise as strongly as in recent months,
Zhuang said.
Other indicators also worry analysts. The broad measure of money
supply, or M2, rose by 18.5 percent by the end of September, 1.39
percentage points higher than the average of the first half of the
year.
Various forecasts have put gross domestic product growth at
above 11 percent for this year, while the government suggested 8
percent would be the most desired for a sustainable and healthy
economy.
The central bank's monetary policy committee late last month
said it would continue to adopt a "moderately tight" monetary
policy.
"In my view, regulatory measures may be further tightened in the
wake of the 17th Party congress," Zhuang said.
Zhu from the SIC said the State should not only tighten monetary
policy, but adjust fiscal policies.
"It should reduce the fiscal deficit," he suggested.
(China Daily October 15, 2007)
