China's CPI picks up amid rising inflation fears

10:12, January 21, 2010      

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China's consumer price index (CPI), a main gauge of inflation, rose 1.9 percent year on year in December last year, the National Bureau of Statistics (NBS) announced Thursday.

The figure rose sharply from the 0.6 percent rise in November when the index ended nine months of decline, it said.

The producer price index (PPI), a major measure of inflation at the wholesale level, rose 1.7 percent in December from a year earlier, the first monthly rise since December 2008.

The full year figure was down 5.4 percent.

"The rise of CPI had proved that we had successfully get rid the risk of deflation which was a great concern last year," said Ma Jiantang, director of NBS at the press conference.

Positive CPI was due to increasing domestic demand as the economy had gradually recovered, said Xiong Peng, an analyst with the Bank of Communications.

The freezing weather since November also helped push up food prices, and its impact on CPI was expected to continue till March, he said.

In December, food prices, which accounted for about a third of the CPI, rose 5.3 percent and housing expenditures increased 1.5 percent.

"So long as the government macro economic policies are well implemented, we' believe China's grain prices will keep moderate rise in 2010 given the fact of six consecutive years of good harvests and overall supply and demand situation," Ma said.

Ma noted the upward data also reminded that close attention should be paid to price changes.

"We should stick to the economic policy and better coordinate relationship between maintaining economic growth, adjusting economic structure and handling inflation expectations to prevent fast price rises," he said.

The government should take preemptive measures to tackle the rising inflation concerns as the easy monetary policy adopted around the world was going to impact the real economy, he said.

To check the breakneck bank credit growth and looming inflation , China's central bank raised the one-year bill yields and asked commercial lenders to keep more money in reserves. That fueled more expectations for interest rise.

Xiong predicted the interest rise would not realize until the second quarter. But the central bank would adjust the reserve requirement ratio more frequently in the first quarter to keep balanced monetary expansion.

He expected the full year inflation would climb three to four percent in 2010, from a decrease of 0.7 percent in 2009.

Source: Xinhua

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