Central Bank: China can keep CPI at 4 percent for whole year

16:45, March 24, 2011      

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Controlling inflation will be the top priority of China's central bank, said Yi Gang, deputy governor of the People's Bank of China and administrator of the State Administration of Foreign Exchange, in Hong Kong on March 23. He is confident that the CPI for the entire year of 2011 on the Chinese mainland can be maintained at around 4 percent.

Yi delivered a keynote speech titled "Challenges Facing China's Fast Economic Growth" during the "China Economic Development Forum" hosted by the Hong Kong University of Science and Technology on March 23.

Yi said that the CPI in Chinese mainland stood at more than 3 percent in 2010 and the figure reached as high as nearly 5 percent in the first two months of 2011. The inflation pressure has mainly arisen from the rise in property rental, housing and food prices.

He believes that the first-half CPI will reach 5 percent because of low bases a year earlier. The effect of low bases is expected to last into June or July and weaken thereafter. Yi believes that if macroeconomic policies are appropriate, CPI will drop in the second half. He is confident that the full-year CPI will stand at around 4 percent.

The top priority of the central bank in 2011 is to combat inflation and stabilize commodity prices, so all available policy tools, including interest rates, exchange rates, deposit reserve rates and open market operations, will be under consideration.

In terms of the balance of payments, Yi believes that this is another challenge facing the Chinese economy. He analyzes that the proportion of Chinese mainland's current-account surplus to GDP has already shown a declining trend. The figure stood at 11 percent in 2007 and dropped to 5 percent in 2010.

Yi believes that China should reduce the trade surplus mainly by increasing imports instead of cutting exports. In terms of policies, he believes that China should adopt measures to boost domestic demand and alleviate its reliance on external demand, raise wages, improve the social security system, advance resource pricing reforms, promote capital account liberalization and push forward foreign exchange reforms in order to achieve a balance of payments.

$<i>By Li Jia, People's Daily Online</i>
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(Editor:张洪宇)

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