Experts alert to inflationary trend (China Daily) Updated: 2004-03-13 00:06
China's consumer prices rose 2.1 per cent in
February in comparison to the same month last year, the National Bureau of
Statistics said on Friday.
February's consumer price index (CPI), policy-makers' key inflation gauge,
eased significantly from 3.2 per cent price growth in January, the bureau said.
Urban CPI rose a year-on-year 1.4 per cent in February, while that in rural
areas rose 3.3 per cent, it said.
Qi Jingmei, a senior economist with the State Information Centre, said the
lower CPI figure in February was mainly because of the week-long Lunar New Year
holiday that fell in February in 2003 but in January this year.
"Due to a spending spree last February, the prices were high that month," she
said.
But this year, the prices returned to normal in February because the spending
spree was one month earlier, she said.
Zhu Jianfang, an economist at China Securities, agreed with Qi, adding that
the CPI would go back to a relatively high level in March.
The higher CPI in the previous two months, which stood at 3.2 per cent -- the
biggest in nearly seven years, increased worries for both government officials
and economists who thought the country's economy might overheat.
People's Bank of China's Governor Zhou Xiaochuan said the government should
be alert to possible inflation.
Researcher Wang Zhao of the State Council's Development Research Centre said
there are already some early signs of inflation.
Zhu Jianfang said if CPI continues to stay at the 3 per cent level or higher
in the coming months, there will be the possibility of raising interest rates.
Song Guoqing, a professor at Peking University, said the government should
already have raised the interest rate to deal with the increasing inflationary
pressures.
"If people feel the trend of prices rising, they will rush to buy more
goods," he said.
The panic purchasing will push commodity price rises further, he said. "Then,
inflation will occur."
The government should adjust the interest rate in a timely fashion, he said.
Presently, the benchmark one-year bank deposit rate is set at 1.98 per cent.
"People are losing out when they save their money in banks because of low
interest rates," he said.
The lower interest rate would also have an impact on people's consumption
behavior, he said.
People would borrow money from banks to buy larger items like houses and wait
for further price rises to make profits.
This would stimulate demand, which in turn fuels inflation, he said.
The lower interest rate would also stimulate investment, some areas of which
have been considered overheated, Song said.
But Zhou Xiaochuan said the government chose not to raise the yuan interest
rate this month, because inflation was still mild.