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Modest rise in consumer prices acceptable: NDRC

By Chen Yang (Global Times)

08:11, April 17, 2012

A modest rise in consumer prices is inevitable and acceptable, an official with China's top economic planner said yesterday, as long as the rise is slower than the rate of economic growth and income growth.

A reasonable increase in prices cannot be avoided, given increasing demand for agricultural products and the rise of labor, resources and environmental costs, Peng Sen, deputy director of the National Development and Reform Commission (NDRC), said in an article published yesterday in Qiushi Journal, the main theoretical publication of the Central Committee of the Communist Party of China.

But as long as the rise in prices is notably slower than the rate of economic growth and income growth, it will be acceptable to society in terms of macroeconomic policy, Peng said.

Peng's comments came after China's consumer price index (CPI) rose 3.6 percent in March from a year earlier, accelerating from a 3.2 percent rise in February but within the government's annual target of 4 percent.

"The 4 percent goal indicates that China's tolerance of inflation is higher than in the US and some European economies, where the annual inflation target is set within 2 percent," Wang Yuwen, an analyst at the Bank of Communications, told the Global Times yesterday.

"Considering the recent price rise of fuel and of consumer goods such as edible oils and shampoo, China still faces inflationary pressure in the short term," she said.

The NDRC held talks with two edible oil producers, Yihai Kerry Foodstuffs Marketing Co and COFCO Group, earlier this month after they announced an 8 percent rise in the prices of some of their products.

Media reports said the commission had also talked with 17 industrial associations across the beverage, dairy, sugar and liquor sectors, a move intended to help stabilize prices.

It is necessary for the NDRC to hold talks with producers and conduct price inspections, Peng noted. The government could also prevent a rapid rise in the prices of daily necessities through subsidies and temporary price-intervention measures.

"Holding talks with companies can only prevent price rises in the short term," Li Guoxiang, a researcher with the Rural Development Institute of the Chinese Academy of Social Sciences, told the Global Times yesterday.

"Using administrative means to control price increases might cause problems such as price distortion," he said. "In the long term, the government should make efforts to increase supply and reduce logistics costs," Li noted.

Wang said inflation is likely to stay between 2.7 and 3.3 percent this year.

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