China's economic growth is expected to exceed 11 percent for
2007 and growth in the consumer price index (CPI), the main measure
for inflation, will be around 4.5 percent year-on-year, the central
bank said yesterday.
China's trade surpluses will remain large but their growth rate
will gradually ease, the People's Bank of China said in its
third-quarter monetary policy report.
"The inflationary pressure on the whole remains large and
attention still needs to be paid to inflationary risks," the
central bank said.
This indicates further tightening measures, such as interest
rate hike, may follow, analysts said, although they were divided on
the timing.
"The central bank will probably raise the interest rate, given
its claim in the report and the expected strong economic indicators
for October," said Chen Xingdong, chief economist of BNP Paribas
Peregrine Securities. "It will meet with little opposition."
The central bank has raised the rate five times this year.
"There is room only for once more by the year-end," he said.
The market has widely expected CPI growth to rebound after
easing to 6.2 percent in September from 6.5 percent in August. Chen
said it may reach 6.7 percent in October.
Goldman Sachs (Asia) released a report yesterday that pointed to
an expected 6.8 percent growth in CPI.
Liang Hong and Song Yu, Goldman Sachs economists, also said in
the report that two more interest rate hikes are possible by the
end of this year.
They raised their full-year 2007 CPI forecast to 4.8 percent
from 4.5 percent and to 4.5 percent for 2008 from the previous 4
percent.
"One reason for the strong CPI growth is that the base figure of
last October is low," Chen said.
Grain and food prices have rebounded and energy prices continue
to rise, which have both contributed to CPI growth.
China raised prices of major oil products from November 1,
driven by the continually rising oil prices in the global
markets.
The central bank said another factor for inflation is rising
salaries, which will push up overall price levels.
Economists expect China's economy will continue to be strong.
Fixed-assets investment, money supply and liquidity, apart from
trade surplus, will all remain at a high level.
The central bank said previous tightening measures need time to
materialize. Those factors, coupled with high prices, will add to
pressure on policymakers to further tighten the economy.
(China Daily November 9, 2007)
