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The ex-factory price of China's industrial products, an indicator of consumer price trends, rose 3.5 percent in January compared with a year ago, the National Bureau of Statistics said Monday.
The ex-factory price, which is measured at the seller's factory gate, rose significantly from the 1.9 percent growth seen in November and 1.2 percent in October, propelled by soaring costs of raw materials.
Steel product prices rose between 17.2 percent and 33.1 percent in January compared with the same month last year, spurred by strong demand.
Alumina prices surged 35.7 percent in the month while copper prices surged 14.8 percent and zinc prices rose 11.4 percent, the bureau said.
Crude oil prices climbed 6.7 percent in the month from a year ago, while coal prices rose 8 percent, it said.
The ex-factory prices of industrial products, as well as purchasing prices for raw materials, fuel and energy, are important indicators for the consumer price index (CPI), Chinese policy-makers's key inflation measurement, said Qi Jingmei, a senior economist with the State Information Centre.
China's CPI rose a year-on-year 3.2 percent in January and December, the biggest since April 1997, when it was also up a year-on-year 3.2 percent.
Higher CPI and fixed asset investment growth worry government officials and economists who are weary of overheating in the country's economy which leads to inflation.
"There are signs that China's economy might be overheated," said Qiu Zhaoxiang, a professor at the University of International Business and Economics.
China's economy, fueled by the 26.7 percent growth in fixed asset investments, grew a year-on-year 9.1 percent last year.
Investment in industries such as real estate, steel and cement has become overheated, he said.
An overheating economy would dampen the country's future development, he said.
"If consumer prices and investment continue the rapid growth momentum in the months ahead, the central bank is likely to jack up the interest rate for the first time in eight years," Qiu said.
Zhou Xiaochuan, governor of the People's Bank of China, said earlier that the government would give key attention to curbing inflation this year.
"The central bank will use various instruments to adjust credit growth," the central bank governor said.
The government has already taken a series of measures to control money supply since last year.
After boosting money supply to keep the economy from growing too quickly and to fight the deflation which emerged during the Asian financial crisis of 1997-98, the central bank began tightening credit last year through the open market.
With the aim of further controlling the money supply, the central bank also issued a rule tightening controls on loans to the fast-growing real estate industry.
In addition, central bank raised reserve ratios for commercial banks.
Zhang Liqun, a senior researcher with the State Council's Development Research Centre, said the country's CPI cannot continue to rise to more than 5 percent this year.
The increased supply capacity will restrict the consumer price from rising too much, he said.
Compared with 1992-93, the country's supply capacity is strong enough to meet market demand, Zhang said.
Inflation in 1993-95 was mainly triggered by the lack of basic products due to the weak agricultural and industrial production capacity, he said.
At that time, the country fell short on food, raw materials and electricity, and prices rose quickly.
Since the mid-1990's, the country's economy has walked out of the supply bottleneck, he said.
A study by the Ministry of Commerce on the demand and supply situation of the country's 600 major products suggests that no product falls short of supply.
(China Daily February 24, 2004)
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