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NDRC Allays Price Fears
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China's top economic planner yesterday said prices of only some categories of consumer goods have risen in the past few months, and assured consumers that the country had not entered the "dawn of full-scale inflation".


The National Development and Reform Commission (NDRC) assurance comes amid heated inflation debates, triggered mainly by the dramatic rise in the consumer price index (CPI) last month.


After an in-depth analysis, the NDRC, which is also the country's price watchdog, said prices of consumer goods have risen in only two of the eight categories.


"We know about the hot debates but our judgment is that inflation is still structural and partial," said NDRC price department director Cao Changqing.


But he didn't say whether the country could be threatened by full-scale inflation in the near future.


Instead, he said the government has already implemented measures to control price rise and increase the supply of goods.


Official statistics show the 5.6 percent inflation rate in July was pushed mainly by steeply rising prices of food, meat (pork) and housing-related products.


On the other hand, prices of entertainment and communication products and clothes have dropped in the first seven months of the year, and those of household appliances, alcohol and healthcare goods rose only slightly.


Cao played down the risk of inflation, saying the rate of increase in wholesale prices of industrial goods and production materials has slowed down.


From January to July, wholesale prices of industrial goods rose 2.7 percent year-on-year, that is, 0.2 percentage points lower. Production material prices rose 3.8 percent year-on-year, which was 2.3 percentage points lower.


Inflation warning


But some economists have warned that China already faces a high risk of inflation because many a factor indicates that the pressure is growing fast.


"We'd better say risks exist and take measures to prevent it from happening," warned Wang Tongsan, director of Quantitative Economy Institute of the Chinese Academy of Social Sciences, in an article published yesterday.


As a leading drafter of important central governmental policy documents for years, Wang is the second leading economist to send out warning signals. Last week, renowned economist Justin Lin, of Peking University, said China had entered a cycle of high prices.


Factors such as record high investment costs, growing labor costs, increasing consumption demand and price hike in the international market have fueled inflation fears, Wang has written. "All these factors already exist and are putting pressure."


Wang has even said that the government has to intensify its efforts to bring this year's inflation rate below 5 percent, the international benchmark for inflation. The rate in 2005 and 2006 was 1.8 percent and 1.5 percent, but it climbed to 3.5 percent in the first seven months of this year.


"We should step up our efforts to prevent inflation in 2008," Wang has written. "Even after pork supply is normalized, other factors could trigger inflation."


(China Daily August 21, 2007)


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