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Long-term inflation in China predicted

(Shanghai Daily)

09:55, September 18, 2011

China should maintain its tightening policy stance to contain inflation, Zhu Min, vice managing director of the International Monetary Fund, said Friday, while suggesting that price rise will be a long-term phenomenon in the country.

"China is now standing at a turning point of economic growth. If we look into the history of Japan and South Korea, a long period of inflation will follow at this stage of economic development," Zhu said in an online interview at the Summer Davos Forum in Dalian, northeast China's Liaoning Province.

The inflow of global liquidity, rising prices of commodities around the world and more expensive labor costs at home will contribute to persistent inflationary pressure in China, Zhu said.

"But China should also observe subtle policy changes in other countries," Zhu added. "Against the background of a possible global economic recession, China should keep its own growth at a healthy level by making policies flexible."

China's inflation rates have hovered at a high level since the beginning of this year. Consumer Price Index, the main gauge of inflation, expanded 6.2 percent from a year earlier last month after hitting a 37-month high of 6.5 percent in July.

Between January and August, China's consumer prices jumped 5.6 percent year on year, surpassing the country's target of keeping it under 4 percent in each of the first eight months.

The Asian Development Bank raised its projection of China's inflation this year to 5.3 percent on Wednesday from a previous estimate of 4.6 percent made in April.

The bank also slashed its forecast for China's economic growth rate for this year to 9.3 percent from a former 9.6 percent because of weak global demand.

But Zhu said the world economy may be able to avert a dreaded double-dip recession if governments can enact proper policies to rebalance their economies. Developing countries need to stimulate domestic demand while rich nations should boost investment.

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