Experts see inflation begin to ease in Aug.


Updated Mon, 16 Aug 2004 00:00:00 GMT

China's consumer prices rose by 5.3 per cent year-on-year in July, the National Bureau of Statistics said yesterday.

    The consumer price index (CPI), policy-makers' key inflation gauge, was greater than the June figure of 5.0 per cent. But CPI in July fell 0.2 per cent from June.

       The bureau said the CPI rose year-on-year by 4.9 per cent in urban areas but by 5.9 per cent in rural areas.

Economist Zhu Jianfang at China Securities said CPI had reached its peak.

"The consumer prices should begin to drop from August," he said.

The higher CPI was partly due to a supply bottleneck in some sectors, according to an earlier report from the statistics bureau.

 Fast fixed asset investment growth since the second half of last year resulted in price rises for products such as steel, non-ferrous metals, coal, electricity and oil, the report said.

    A fall in the grain production, which declined 5.8 per cent last year, also resulted in a rapid price rise since last October.

    The report said the outbreak of bird flu in the first quarter led to price rises for meat, chicken and eggs.

    Price fluctuations in the international market and a lower price base last year due to the SARS (severe acute respiratory syndrome) outbreak also contributed to the higher CPI, it said.

    Qi Jingmei, an economist at the State Information Centre, said the price situation would ease in the next few months.

  The central government's macro-economic control measures would also have an impact on higher CPI.

    China took a raft of measures since the second half of last year to try to cool down the economy. The measures include raising bank reserve requirements three times and curbing unwanted fixed asset investment projects.

 The macroeconomic control measures have achieved initial results, said Zhang Xueying, another economist from the information centre.

    Price rises in some sectors, such as steel and non-ferrous metals, which saw an overheating investment, have been controlled to some extent.

The growth in industrial output and money supply also slowed down.