Economist: Long-lasting inflation unlikely in China

16:13, June 07, 2010      

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Long-lasting inflation is unlikely to hit China in the coming decade, said Li Yang, vice president of the Chinese Academy of Social Sciences (CASS) on June 6.

"In general, China is facing the problem of a lack of demand. Twenty-one of 24 industries are experiencing overcapacity, which nullifies the massive price hike," Li said.

Since the beginning of 2010, certain agricultural products including garlic have shown a large-scale price increase. Li said that supply-side factors have led to rising prices in some areas. If macro-economic measures are used to fix those issues, it would only cause more new problems, Li said.

He said that prices levels would stay stable in general this year, even if there are some minor fluctuations in prices. The current issue is asset prices. Government regulators should focus on real estate and stock markets and deal with them cautiously.

Li said that China's exports might be impacted by Europe's sovereign debt crisis, but the momentum of development is not certain. China's economy is unlikely to hit bottom for a second time, and the economic growth rate of China should almost certainly reach 9 percent in 2010, Li said.

Due to the European debt crisis, E.U. economic growth might decline, which should have an impact on China's exports because China is the most important exporter to the European Union, said Yu Yongding, research fellow of the CASS.

By People's Daily Online


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