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CPI to Rise Moderately, Still Under Control
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A Chinese national research center said on Wednesday that the consumer price index (CPI) is still within government control although it will "keep rising at a moderate rate for a relatively long time".


Recent price hikes signaled moderate inflation only, in which the prices rise steadily at a relatively low rate. Inflation was not high nor out of control, said the State Information Center (SIC).


SIC research into the CPI changes in the past two decades suggested that a growth rate of five percent was the threshold for moderate inflation in China. It is well above the accumulative 3.5 percent CPI growth in the first half.


Although the threshold was exceeded by the 5.6-percent growth in July, inflationary pressure was not severe compared to similar accelerated price hikes in 2004. At that time the CPI rose by at least five percent for four straight months from June to September.


If accelerated CPI growth occurred, the government could still effectively rein in prices through policies such as the suspension of government-controlled price rises, said the SIC.


The SIC attributed the pressure for further price hikes to future growth in food and housing prices.


Food price increases would likely last some time because of tight domestic supply market and soaring international food prices, which rose 20 percent in the first four months, SIC quoted from a World Bank report in May.


Housing prices, accounting for 13.2 percent of the CPI, increased by four to five percent since 2005 because of the soaring demand.


Large salary increases for government workers last year, together with the booming stock and real estate markets, boosted domestic demand, which would drive up prices overall, the SIC said.


The SIC forecast that CPI growth would stand at around four percent in 2007, higher than the three-percent goal set at the beginning of the year.


(Xinhua News Agency August 16, 2007)


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