According to the data released by National Bureau of Statistics(NBS) on July 13, China’s consumer price index (CPI), the main gauge of inflation, rose 5.4 percent year-on-year in the first half of this year, higher than the 5 percent in the first quarter of this year. Food prices, which account for nearly one third of the basket of goods in the nation’s CPI calculation, rose 11.8 percent from a year earlier in the first six months, according to the NBS. The figure was higher than the 11-percent increase in the first quarter.
As the CPI in China hit a new peak of 6.4% in June, pushed up by soaring pork price, some other commodity producers, including cooking oil, milk powder, sports clothing and mooncakes, also seem to be considering for price increases of their products.
Yan Wei, chief economist of Orient Securities, believed that the surging cost remains the major cause for prices hike to a threeyear high. The industrial production price (PPI)’s conduction pressure to the CPI is still continuing. In the third quarter, the new factors which push up price is expected to move up the average price level higher than the second quarter. He Keng, Vice Director of Financial & Economic Commission of National People’s Congress, also said that the current was cost-pushing inflation, which was related to the proactive fiscal policy and large scale investment in infrastructure. And the other reasons were minor factors. There were extra issuance of currency, but not so severe as some people judged. It must be excessive to add loans of RMB10 trillion in one year since our economy doesn’t need so much currency.
In the middle of the year, price has become the concern of all the people nationwide. The public would ask, “Will the price continue to rise in the second half of the year? If so, when will it begin to fall? Will the Central Bank raise the interest rate once more?”
Some institution or experts gave their predication. China International Capital Corporation Limited(CICC) expects the CPI growth rate to fall in the second half, to 4% or so in the fourth quarter, and the annual growth averages 4.8%; economic growth would drop from 9.7% in the first quarter to 8.4% in the fourth quarter, averaging 9.2% for the year. In 2012, the driving forces for economic growth may be weakened, contributing an annual average growth of 8.7%, slow in the first half and fast in the second; inflation will further ease, averaging 3.8% for the year.
However some people proposed their doubt on the optimistic predication. If the international oil prices reflect the strong inflation in international market, can CPI in China stay low alone? Even if CPI reach the top for the year in June or July, can we make sure that it will drop to around 4%? Even if the CPI in 2011 averaged 4.8%, within the expected 5% by Premier Wen Jiabao, won’t it turn to rise again next year, and to above 6%? Some other people even still wonder whether there is still possibility of stagflation for China’s economy since China’s economy grew by 9.6 percent yearon-year in the first half of 2011 and the GDP growth rate slows to 9.5 percent in the second quarter of 2011 from the 9.7 percent posted in the first quarter.
There are signs that, with inflationary pressure still lingering, anti-inflation will still be the primary task of the government’s macro-control and monetary policies in the coming period.
Then what would be the trend of the price? Will the CPI keep on rising in the second half of this year? Will China’s economy confront stagflation or not? What measures will the Chinese government take to control the inflation? Special Report of China’s Foreign Trade this issue hopes to help answer these questions.