China inflation may hit 6.2% in Q3

0 Comment(s)Print E-mail Agencies via China Daily, August 16, 2011
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China's average inflation rate is likely to accelerate in the third quarter to 6.2 percent from 5.7 percent in the previous quarter, a state think tank forecast on Tuesday, warning that food price pressures would persist, Reuters reported.

As inflationary pressure stays high, Beijing should continue to take measures to cool the economy, the State Information Center said in an overview of the economy published in the China Securities Journal.

"China must tolerate a moderate cooling in the economy," the think tank under China's National Development and Reform Commission, the economic planning agency, said in the report.

It forecast China's economy would grow by 9.2 percent in the third quarter, a slight slowdown from the first two quarters of the year.

Although rises in the price of pork, a big part of the Chinese consumer's food basket, would ease, the price of eggs and other meats will probably rise more steeply in the third quarter, the Center said.

"The impact of this on price rises should not be dismissed," said the center's report.

But it added that China's inflation would peak in the third quarter.

"Although observed inflationary pressure remains quite strong, there is no trend towards accelerating rises, and it remains within controllable bounds," it added.

China's economy grew 9.5 percent in the second quarter from a year ago, not far off the 9.7 percent expansion in the first three months of the year.

China's annual inflation quickened to a higher-than-expected 6.5 percent in July from 6.4 percent in June.

The unexpected pick-up kept inflation at its highest mark since June 2008, when global oil prices were soaring toward a record high.

But a Chinese price-policy official was reported on Wednesday as saying that overall consumer prices would retreat for the rest of the year as the carry-over effect -- the passing on of factors causing price rises in the earlier part of the year to the later part -- tapers off.

The State Information Center also forecast China's trade surplus with the rest of the world would grow by 6.7 percent in the third quarter, reaching $69.6 billion, reversing a shrinkage in the surplus in the first half of the year.

Chinese import growth in the third quarter was likely to slow to 20.0 percent year-on-year, compared with 27.6 percent growth in the first half of 2011, said the report. Export growth would slow to 18.0 percent, compared with 24.0 percent in the first half, it also said.

The US Federal Reserve could add to inflationary pressures in China if it embarks on another round of quantitative easing, the center cautioned.

"That would undoubtedly exacerbate inflationary expectations globally," it said. "Depreciation of the dollar will bring fresh inflationary pressure on China from the outside."

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