Revision needed for CPI target

08:55, October 14, 2010      

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China should consider raising its average annual inflation target to 4 percent from 3 percent to help ease pressure for yuan appreciation, a government think tank said in a report.

Lifting the goal for core inflation would make it easier to deal with excess liquidity and improve income distribution, and it would also create a more relaxed environment to enact price reforms, the official Shanghai Securities News reported Wednesday, citing the Chinese Academy of Social Sciences (CASS).

Many analysts believe China is on track to come close to its inflation target of an average 3 percent this year, but that price pressures could prove more troublesome in the years ahead.

The report also cited Zhang Hanya, an official at the National Development and Reform Commission, the top planning agency, as saying that China's rapid growth must be accompanied by an increase in the level of inflation. In particular, a rise in agricultural prices, which lag international levels, would help improve income allocation, he said.

Chinese consumer price inflation has steadily risen in recent months, in part because widespread floods pushed up vegetable and food prices. September data, due next week, is expected to show that inflation climbed to a nearly two-year high.

CASS forecast that inflation would peak in the third quarter and fall back until mid-2011, before starting to pick up again.

Source: Global Times


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