China has initially succeeded in its fight against deflation, said Zhang Xueying, a division chief of the State Information Center.
The consumer price index, Chinese policy makers' key inflation gauge, rose 0.2 percent year-on-year during the first nine months.
"Deflation is now over," Zhang said.
A glance at economic figures supports Zhang's declaration.
Exports soared 33.1 percent during the first three quarters of this year due to the recovery of the world economy, and imports rose 38.7 percent thanks to a more active domestic economy.
Investment in fixed assets was up 12.9 percent during the period, as the government continued to pour money into the economy.
Retail sales, the main indicator of consumption, rose 9.9 percent from January to September to 2.433 trillion yuan (US$293.2 billion).
But Zhang Liqun, a senior researcher with the Development Research Center under the State Council, said the 0.2 percent rise in consumer prices did not mean overall supply and demand has reached a rational balance.
The researcher's remarks indicate that China's deflationary pressure may still linger.
"The price rise was cost-driven, while not a short of supply," he said.
The increasing price for oil and steel on the international market has forced China to pay more.
"Chinese enterprises will be forced to increase cost for production," Zhang Liqun said, adding this is not good for economic development.
"The rise in consumer prices was also due to the price hikes for service items such as education, water and electricity, which is not market-driven," he said.
China should remember that it still lack a strong basis for the country's consumer price to rebound further.
The researcher said China's retail price index was still in the negative growth of 1.7 percent during the first three quarters.
However, Zhang Xueying did not quite agree, saying the consumer price rise was mainly due to strong demand stemming from the country's rapid economic growth and people's increasing confidence for their future.
"China's economy has turned for the better," the chief said, adding the country's gross domestic product rose 8.2 percent year-on-year during the first three quarters.
"The establishment of a nation-wide social security system further removed worries from residents," he said.
Zhang said the world economy's recovery will continue to absorb more goods from China.
The central government's policies to stimulate consumer spending would also continue to play a role, he said.
The central bank has cut the interest rates seven times over the past three years, slashing interest on one-year deposits to 2.25 percent.
A disguised interest rate cut in the form of a 20 percent tax on bank deposit income was put in place in November last year.
The central government also took other measures such as increasing salaries, providing compensation for laid-off workers and providing more pensions for retirees to encourage spending.
In a further move to stimulate consumer spending, the government announced an extension of national holidays.
During the week-long National Day holiday, a total of 59.8 million people travelled across the country, which generated 23.0 billion yuan (US$2.8 billion) in tourism revenue.
"Consumption will continue to be a major force for the country's economic development," Zhang said.
The government also plans to spend more on investment to keep the economy going, he said.
China is likely to issue an additional 160 billion yuan (US$19.3 billion) in treasury bonds for investment, the chief said.
The government also hopes to encourage investment from private companies by breaking the monopoly of certain sectors such as telecommunications and railways.
These are signs that private investment has begun to mobilize, Zhang said.
(China Daily 10/30/2000)
