Measures aim to stabilize prices

By Wu Jiao (China Daily)
Updated: 2008-01-10 09:28

The government will introduce a range of temporary price-intervention measures in a bid to stabilize the cost of daily necessities, a State Council executive meeting said yesterday.

According to the meeting, large-scale producers of such products must seek government approval before imposing any price increases.

Similarly, large-scale wholesalers and retailers that want to raise prices will first have to notify the government.

The State Council has not yet specified what the products are, or when the measures will be introduced.

The country’s Price Law stipulates that the State Council can temporarily freeze prices or centralize the price-setting power on part of or the whole market if the prices undergo strong fluctuations.

The prices of the country’s major foods, including grain, pork and cooking oil, surged last year, lifting the consumer price index to an 11-year high of 6.9 percent in November, well above the government’s target of 3 percent.

Despite a secure supply, China still faces the prospect of further price hikes as the global prices of crude oil and food surge, the State Council said.

It also ordered a halt to any price rises in crude oil, natural gas, electricity, water, heating, public transportation, education and healthcare.

Pledging to crack down on market manipulation or hoarding, the central government will also arrange special campaigns to oversee local authorities in stabilizing prices ahead of the festive season.

According to the State Council, attempts are also being made to revise a regulation to curb illegal price fixing, which will impose heavier punishments on industry associations found guilty of manipulation.

Cheng Guoqiang, deputy director of the Market Economy Institute with the Development and Research Center of the State Council said: “The measures aim to regulate market order, stabilize price expectations and ensure a healthy and normal market.”

“Due to its wide coverage, price rises in the daily necessities market, especially the grain sector, might magnify and spread to other sectors,” he said.

“Therefore stable prices in these sectors are key for the stability of the market as a whole.”

Cheng said the measures are systematic, taken after key government meetings held last year set the tone of “preventing economic growth from evolving from rapid to overheating and preventing price hike shifts from going from structural to inflationary”.

 

CPI surge, US interest rate cuts to influence China policy

Xinhua)
Updated: 2007-12-12 21:05

China’s Central Bank governor Zhou Xiaochuan answers a question during a news conference at “The Third Strategic Economic Dialogue” Beijing December 12, 2007. [Agencies]

China’s central bank governor, Zhou Xiaochuan, said on Wednesday that surging domestic consumer prices and recent US interest rate cuts would have “considerable influence” on Chinese monetary policy.

The central bank, the People’s Bank of China (PBOC), would “seriously consider” the situation, added Zhou.

Zhou made the remarks at a news briefing on the sidelines of the Third China-US Strategic Economic Dialogue (SED) held in Beijing. The two-day event began on Wednesday.

Increases in the consumer price index (CPI) had been mainly driven by soaring food prices, Zhou said. Whether and how the CPI could be curbed through monetary policy was being studied, Zhou said, admitting that the issue could be contentious.

China’s consumer price index (CPI) for November rose 6.9 percent from a year earlier, according to statistics released from the National Bureau of Statistics (NBS) on Tuesday morning.

The figure showed that inflationary pressures were persisting, and it triggered concern about further tightening measures.

As to the recent interest rate cuts by the US Federal Reserve, Zhou said China concerns the possible indirect impact on the country, which already had excess liquidity in the capital market.

The governor also said that China backed a strong dollar and would back US efforts to recover from the sub-prime credit crisis.

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Higher CPI could slow reform

By Wang Xu (China Daily)
Updated: 2007-12-13 08:57

Mounting inflationary pressure could slow down China’s reform of the pricing mechanism for resource and energy products, economists said.

“The high consumer price index (CPI) has put the central government in a dilemma in terms of reforming its pricing mechanism of resources and utilities,” Zhang Zhuoyuan, a researcher with the institute of economics of the Chinese Academy of Social Sciences, said.

“When the CPI stays above 4 percent, there is little room for price hikes of fuel and public utilities.”

China’s consumer price index, a gauge for inflation, climbed 6.9 percent year-on-year in November, a record high in 11 years, the National Bureau of Statistics (NBS) said on Tuesday.

The Chinese Academy of Social Sciences, a top government think tank, forecasted China’s CPI would reach 4.5 percent for 2007 and 4 percent in 2008.

China is poised to further reform the pricing mechanism of resource products next year, according to the Central Economic Work Conference held last week. The move is expected to raise the prices of resource products, bringing them roughly in line with those on the international market.

“The reform will be carried out step by step with careful study, especially for natural gas and petroleum products,” Ma Kai, minister of the National Reform and Development Commission, China’s top economic planning agency, said.

Prices of petroleum products such as gasoline and diesel have been held low by the government over the past few years, which helped ease inflationary pressure. China raised domestic gasoline and diesel prices by a tenth on November 1, the first increase in 17 months despite the fact international oil prices have almost doubled over the same period.

“Higher utilities prices will definitely give further incentives for local enterprises to increase the efficiency of energy consumption,” Zhuang Jian, a senior economist with Asian Development Bank, said.

“But the central government will be careful because increasing utility prices will be passed onto consumers.”

Presently, the nation’s inflationary pressure has so far been confined mostly to food prices, which accounts for one-third of its CPI basket. Food prices gained 11.3 percent in the first 10 months, accounting for 84 percent of the nation’s consumer price gains.

However, the producer price index, an early indicator of price pressures, started to pick up in October, largely due to the rise in oil costs. The rise has caused concern about whether the inflationary pressure had expanded beyond the food sector.

According to the NBS, China’s producer prices gained by 4.6 percent year-on-year in November, the largest monthly increase in more than two years.

“We expect continued hikes in energy and resource prices, the utility component of the CPI, will likely continue to be a main contributor to CPI in 2008,” Sun Mingchun, a Hong Kong-based economist with Lehman Brothers, said.

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Bank reserve ratio raised to cool economy

(Agencies/Xinhua)
Updated: 2007-11-11 09:12

China’s central bank will raise the reserve requirement ratio by 0.5 percentage points for commercial banks to 13.5 percent in an effort to cool the booming economy, the People’s Bank of China said late Saturday.

It will be the ninth such move this year, aimed at “strengthening liquidity management in the banking system and checking excessive credit growth”, the central bank said in a statement posted on its website.

“To strengthen liquidity management in the banking system and curb excessive loan growth,” lenders must set aside 13.5 percent of deposits from November 26, the statement said. The ratio, up from 13 percent, is the highest since at least 1987, Bloomberg reported.

“Increasing reserve requirements is the most efficient way to manage the excess liquidity coming from the trade surplus every month,” said Frank Gong, chief China economist at JPMorgan Chase & Co. in Hong Kong. “If inflation continues to surprise on the upside, the central bank may need to raise interest rates.”

The move came shortly after the central bank announced earlier this week its prediction that China’s economy would expand more than 11 percent for the whole of 2007, with inflation rising 4.5 percent.

To ensure rational credit growth, the central bank also said it would continue to implement a tightened monetary policy and take a variety of measures to strengthen the macro-control.

By the end of September, the M2, which covers cash in circulation plus all deposits, grew by 18.45 percent from a year ago to 39.3 trillion yuan (US$5.2 trillion).

China’s commercial banks lent out 3.36 trillion yuan in the first nine months, surpassing the full-year figure of 2006.

China’s economy is in its fifth straight year of double-digit growth, reaching 11.5 percent in the third quarter this year. But the economy is experiencing inflation pressure, largely from sharp increases in food prices, and economists complain that too much growth is being driven by investments in factories and in high-flying real estate and stock markets.

This reserve ratio hike is expected to remove about 190 billion yuan from the financial system. Local-currency deposits stood at 38.3 trillion yuan at the end of September.

Besides raising the required reserve ratio, the central bank has also increased interest rates five times this year and sold bills to soak up cash from the financial system.

Fixed-asset investment in urban areas climbed 26.4 percent in the first nine months from a year earlier, up from the 24.5 percent pace in all of 2006. Industrial production jumped 18.9 percent in September, the biggest gain in three months.

In its quarterly report, the People’s Bank of China said inflation will accelerate to about 4.5 percent this year from 1.5 percent in 2006, citing stronger inflation expectations and pressure from food, energy and labor costs.

Inflation of 6.2 percent in September was close to a decade high because of food-price gains. The rate exceeds the return on bank deposits and encourages households to switch savings into stocks and real estate.

Property prices in China’s 70 biggest cities climbed 8.2 percent in the third quarter, according to the statistics bureau.

China’s trade surplus jumped 56 percent in September from a year earlier, taking it to US$185.7 billion for the first nine months, more than the US$177.5 billion record for all of 2006.

China’s economic growth slowed from 11.9 percent in the second quarter, the most in more than 12 years.
 

 

CPI edges down, inflation pressure remains

(Xinhua)
2007-10-18 19:11

China’s consumer price index, a major barometer for inflation, eased slightly to 6.2 percent in September after surging up to an 11-year monthly high of 6.5 percent in August, Zhu Zhixin, deputy director of the National Development and Reform Commission (NDRC), said on Thursday.

The delegate to the ongoing 17th National Congress of the Communist Party of China ruled out the possibility of sweeping price hikes in the future, but predicted that the prices for farm produce which triggered CPI drastic rise and sparked inflation concern would continue to maintain at high level.

Despite the slight drop in September, consumer prices still grew up 4.1 percent year-on-year over the first nine months compared with 3.9 percent from January to August. About 86 percent of the rise, or 3.5 percentage points, was generated by food price hikes, Zhu said.

Refusing to disclose the GDP growth for the first three quarters which is yet to be released by the National Bureau of Statistics later this month, Zhu said it is too early to say China ’s economy has turned overheated as the short supply of pork didn’ t trigger “comprehensive, lasting and big price hikes”.

He predicted that the prices of grain crops will stabilize gradually as the summer grain crops harvest has surged 1.45 billion kilograms from the previous year to 115.35 billion kilograms this year while early rice output rose slightly to 31.95 billion kilograms.

Currently, most of the country’s industrial consumables remain in surplus. Latest figures from the NDRC revealed that the average price of pork in Chinese shops has dropped 11 percent from its peak in August after the central and local governments earmarked a total 14.6 billion yuan (1.9 billion U.S. dollars) this year to encourage farmers to raise pigs and boost pork supplies.

But Zhu warned against blind optimism, saying that the possibilities of an overheated economy remain while preventing the excess growth of consumer prices should be taken as a major task of macro-economic control.

On the sidelines of the Party congress, Zhou Xiaochuan, president of the People’s Bank of China, subordinated inflation prevention to employment expansion as the second priority of China ’s macro-economic control and the recalibration of monetary policies.

He said that the central bank would continue to adopt a prudent monetary policy to facilitate more coordinated economic development and support consumption expansion

Justin Yifu Lin, an economist with the Beijing University, said that the inflation in China remained low compared with the world’s average as the core CPI excluding food and energy products went up only 0.8 percent year-on-year in the first nine months.

“I am fully confident of the potential of China’s economy. It’s fully possible for China to maintain an annual GDP rise of nine percent in next 10 to 20 years,” he said.

(China Daily)

 

China’s national income per capita ranks it among middle-income countries

www.chinanews.cn

Chinanews, Beijing, Sept 19 – Over the past five years, in terms of total economic volume China’s ranking in the world has moved from the previous sixth to the fourth position now. Its national income per capita has now ranked China among middle-income countries in the world, according to a report released by the National Statistics Bureau on Tuesday. The national income per capita in China has almost doubled over the past five years. In terms of national income per capita ranking China had moved from the 132th position in 2002 to the 129th position in 2006. According to the categorization issued by the World Bank, China has changed from a low-income country to a middle-income country. According to official information, if inflation is allowed for, Chinese urban residents’ disposable income has grown by more than 7% year on year over the past four years. By the end of 2006, the total savings of Chinese urbanites and farmers reached 16.2 trillion yuan, increasing by 7.5 trillion yuan from 2002.

 

Inflation could lead to rate hike – Central bank chief

By Xin Zhiming (China Daily)
Updated: 2007-06-25 07:17 Interest rates could be raised if inflation pressure keeps building, the central bank governor has said.

If the consumer price index (CPI), a key gauge of inflation, continues to rise, “we don’t exclude the possibility of raising interest rates again,” Zhou Xiaochuan said on Saturday in Basel, Switzerland, where he was attending a meeting of central bankers at the Bank of International Settlements.

The People’s Bank of China raised rates twice this year, with the latest on May 19 when the benchmark one-year deposit rate was raised 27 basis points to 3.06 percent.

The same month, the CPI rose the highest in more than two years – 3.4 percent year on year – as pork and food prices soared. It was the third month this year that the CPI exceeded or nudged the 3 percent mark set by the central bank for this year.

Song Guoqing, a senior economist with the China Center for Economic Research at Peking University, said the June CPI could rise as high as 4 percent due to rapid rises in food prices.

Many economists said the CPI will continue on an upward trend until September or October.

Zhang Yongjun, an economist with the State Information Center, said: “We forecast the CPI will peak at 4 percent around October before it starts to decline.”

Dong Dezhi, economist with the Bank of China, said: “We have not seen signs of slow-down in CPI growth in June. It is more than possible that it will continue to rise on the back of the 3.4 percent level in May.”

Apart from steep rises in pork and egg prices, prices of aquatic products and fruits have rebounded in June, adding to inflation pressure, Dong observed. Food accounts for about a third of the CPI basket.

While many worry that rising inflation would be inevitable, Zhuang Jian, a senior economist with the Asian Development Bank, said the authorities are well equipped to control inflation following the experience in the 1990s.

The high CPI rates forecast in the coming months presume that there will be no government intervention, he noted.