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High CPI figure sparks fears of further price hikes
Latest Updated at 2007-August-14 09:40:54
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A 33-month high in China's consumer price index, or CPI, is making inflation one of the top concerns of economists and the general public.

The key inflation indicator rose by 5.6 percent on the back of food price hikes in July, roughly in line with forecasts. Whether the index will continue to climb for the rest of the year is starting to worry people across the country.

July was the fifth consecutive month the CPI rose by more than three percent, the government-set alarm level for the current year. The index for the first seven months rose by 3.5 percent. Most economists predicted the figure for the whole year would stand at around four percent or between four percent and five percent.

Over the past few years, China's economy was on a path of "high growth, high efficiency and low inflation". The CPI went up 1.8 percent in 2005 and up 1.5 percent in 2006. But things changed substantially this year.

According to economists with the National Development and Reform Commission, price hikes for foodstuffs, which have a weight of 33 percent in China's CPI, were the major driving force behind the index rise.

In the first half, the CPI went up 3.2 percent. Foodstuffs alone rose by 7.6 percent, accounting for 2.5 percentage points.

In July, foodstuffs were priced 15.4 percent higher than the same period last year, and the growth rate was 7.8 percentage points higher than the first half. July saw edible oil prices up 30.1 percent, and prices of meat, poultry and related products up 45.2 percent and egg prices rose 30.6 percent.

Economists say price hikes for foodstuffs were a result of grain price rises.

According to the National Bureau of Statistics, on Aug. 1 average procurement prices for rice, wheat and maize rose by 8.4 percent. On Aug. 3 in 36 major cities, prices were up 78.9 percent on the same day of last year for pork, up 23.3 percent for beef, up 15.1 percent for mutton, up 32.8 percent for chicken, and up 23.9 percent for eggs.

Except for pork, farm produce saw price hikes driven by cost rises, a result of mounting grain prices, when in fact supply of beef, mutton, eggs and aquatic products grew by big margins on last year.

Yao Jingyuan, chief economist with the statistical bureau, said the sharp price rise for pork was due largely to higher costs and short supply, which would remain unchanged amid growing demand in the next couple of months.

Yao predicted the CPI for the whole third quarter would rise at a quicker pace than the first half year.

However, the pork supply would improve noticeably in the fourth quarter and the price hike would be curbed accordingly.

Lu Zhongyuan, director of the Macroeconomic Research Institute of the Development Research Center of the State Council, said the continued economic growth and a good harvest of summer crops would offset the food price hikes and the CPI would fall steadily later this year.

Editor: Yan

By: Source: China View website

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