Chinese central bank warns of inflation risks in latest monetary report

http://www.chinaccm.com 2007-8-9 10:56

    China's central bank admitted on Wednesday that the country is 
coming under increasing pressure from price hikes, and acknowledged
 inflation risks are "worthy of attention". 

    The People's Bank of China said in its second-quarter monetary 
report published on Wednesday that the current rising prices were not
 solely caused by accidental and temporary factors, adding that 
inflation risks were on the rise. 

    It warned that the price hikes of food products could spread to 
other consumer products. 

    The report identified four reasons behind the increasing risk of 
inflation. 

    It said prices for grain and meat products would not fall in the 
short term and uncertainties over the autumn harvest were aggravated 
by the ongoing drought. 

    Meanwhile, the demand for grain is increasing from both the 
public and the bio-fuel industry. 

    The meat prices would probably continue to rise in the long term 
owing to the rising feeding costs and the short supply, which would 
not be replenished in the short term due to the breeding cycle of 
pigs, and the price hikes of meat could easily spread to other food
 products, the report said. 

    Prices of energy and resources are under pressure as the world 
petroleum price has climbed to an even higher level and the domestic 
pricing reform of resources and the country's environmental 
protection efforts would also push the prices higher, it said. 

    The report also said labor costs were rising which would eventually
 raise the prices of consumer products. 

    People's anticipation of inflation had been enhanced, and it would
 
put further pressure on price hikes, according to the report. 

    A survey by the central bank in the second quarter showed that 40.2
 percent of those interviewed, the second highest record since1999, 
said they were worried about inflation. 

    China's consumer price index (CPI) rose 3.2 percent in the first 
half of this year, and the growth rate was 1.9 percentage points 
higher than the year-earlier level. 

    Price hike for foodstuffs, mainly grain, meat and fowl and eggs, 
contributed significantly to the rise. Statistics show that foodstuff
 prices rose 7.6 percent, with grain price up 6.4 percent, egg price
 up 27.9 percent and prices for meat and fowl as well as related 
products up 20.7 percent in the first half.