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BIZCHINA / Center
High prices to 'persist' next year
By Fu Jing (China Daily)
Updated: 2007-09-18 09:04
High prices will continue to make life difficult for consumers next year
because the government is likely to further deregulate prices of public
utility items such as water, power and natural gas.
The Asia Development Bank (ADB) has forecast higher inflation. But it
said China's economy would still be running on the fast track.
The sharp rise in food prices this year is going to ease next year but it
would also open the way to implement planned reforms of items controlled
by the State such as water, power and natural gas, the ADB said yesterday.
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The government plans to deregulate the prices to let them reflect how
scarce these necessities are becoming. Rising food prices have so far
forced the government to defer reforms in public utilities.
On this basis, the inflation forecast for 2008 will be 3.8 percent," the
bank said at the release of its Asian Development Outlook in Beijing.
The central government considers a 3 percent inflation as a warning sign.
But the rate has been higher than that for five consecutive months, with
the August figure reaching 6.5 percent.
The ADB's higher inflation assessment coincides with the analysis of some
leading domestic economists. Led by Peking University professor Justin
Lin, they believe the country has entered a cycle of high prices because
of the growing cost of labor, raw material, capital and other production
factors.
The ADB forecast the national economic growth rate will reach 11.2
percent this year and 10.8 percent in 2008. The inflation projection,
pushed up mainly by rising food prices, is 4.2 percent this year and 3.8
percent in 2008. Which means there is a risk that the actual inflation
rate could be higher.
The ADB's confidence in China's economy conforms to the World Bank's
forecast that it can maintain a strong growth momentum and absorb the
impact of a slight global financial turmoil.
ADB economist Zhuang Jian said China needs fast development to create
more jobs and balance income disparity, as well as take further steps to
cool down investment.
Its "top priorities remain creating jobs for nearly 8 million surplus
rural workers migrating to cities each year, and lifting the income of
people in underdeveloped areas," Zhuang said.
The ADB report, however, says investment will remain high, supported by
local governments that want to generate employment and expand their urban
areas. Banks willing to lend and enterprises eager to increase their
earnings, too, would like to see an increase in investment.
The ADB didn't show much confidence in the government's efforts to tame
its fast-paced economy, saying more tightening measures have been taken
to check the investment spree "but their effects are yet to be seen".
It accepted, though, that the country's economic growth slowed slightly
during July and August after the GDP growth accelerated from 11.1 percent
in first quarter to 11.9 percent in the second, the fastest since 1994.
(For more biz stories, please visit Industry Updates)
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