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People's Daily Online>>China Business

China to experience mild inflation for long time

By Luo Lan (People's Daily Overseas Edition)

08:35, January 09, 2012

Edited and translated by People's Daily Online

Zhou Xiaochuan, governor of the People's Bank of China, recently noted that China should not slacken its efforts to curb rising consumer prices, and should continue to properly manage inflation expectations.

Given the country's national conditions and development level, its economy is prone to overheating. Internationally speaking, Consumer Price Index growth in emerging markets is generally higher than in developed countries, so inflation must be taken seriously, said Zhou.

Structural factors for inflation still exist

China should remain cautious despite CPI declines. Zhou said that the country's 2011 inflation control target of 4 percent may be hard to achieve. The inflation rate for the whole year is likely to be around 5 percent.

Most experts believe that although inflationary pressure is expected to drop significantly in 2012, China is still facing increasingly complex international political and economic environment as well as steadily rising costs of labor and raw materials at home. As structural factors for inflation still exist, it will remain a tough task for China to curb inflation and ensure stable prices in 2012.

Certain institutions predict that China's CPI will rebound in early 2012. As the New Year's Day and Spring Festival both occur in January, the prices of agricultural products will continue to rise this month, leading to a higher year-on-year inflation rate in January than that of December, 2011.

Furthermore, the country will moderately loosen its monetary policy this year, which will enable domestic banks to provide more loans. Therefore, the CPI may start to rise again in the second half of the year.

Inflation pressure will always exist

"The inflation pressure will always exist," said Ding Maozhan, associate director of the research office of the China National School of Administration.

Currently there are still many factors that will drive the price to rise. Generally, countries around the world are implementing the easy monetary policy, prices of bulk commodities are fluctuating at a high level and will rise inevitably, and the effects brought by the imported inflation will always exist.

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