(Xinhua)
Updated: 2008-03-02 18:46

Wu Jianmin, spokesman for the first session of the 11th Chinese People's Political Consultative Conference, answers a question at a press conference in the Great Hall of the People March 2, 2008. [Xinhua]

BEIJING -- Inflation remains a primary challenge China faces this year, and thus a focus topic among national lawmakers and political advisors gathering here for their annual full sessions, who said an unwavering tight monetary policy may help maintain steady growth.

China was confronted with more domestic economic challenges as soon as the new year started while the world economy continued to slow down as the impact of the US sub-prime crisis rippled.

Having been troubled by rising consumer price index (CPI) since mid 2007, the country was hit by the worst snow havoc in 50 years in January, which caused a loss of at least 111.1 billion yuan ($15.43 billion).

The CPI, the main gauge of inflation, retouched an 11-year monthly high with a 7.1-percent rise in January. Huge increases in food prices had pushed up CPI by 4.8 percent in 2007, also the highest annual level since 1997.

The volatile international financial markets and spiraling energy and food prices also pose challenges, said noted economist Li Yining, a member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), the country's top political advisory body.

However, Justin Yifu Lin, a deputy to the National People's Congress (NPC) and the World Bank's new chief economist and senior vice president, noted the US subprime crisis would have limited impact on China.

"The demand by the US, China's second-largest trading partner, would not decrease by a large margin as most of Chinese exports to it were low- and middle-end," the national lawmaker said.

Lin's view was shared by Li. He predicted China's GDP growth could still hit around 10 percent this year and expected stable CPI in the second quarter and a light drop in the third and fourth quarters.

A recent online survey by official website xinhuanet.com indicated that price hike is also the "topic of most concern" of Chinese netizens when the two sessions of national lawmakers and political advisors approach.

Song Guoqing, a professor at the China Economic Research Center under Beijing University, believed the tight monetary policy and government's determination to curb inflation was crucial to ease the public anticipation toward inflation.

"Even worse than the inflation itself is the anticipation of further price hikes by the public," he said.

The People's Bank of China (PBOC) will keep the tight monetary policy unchanged to rein in growing inflation, said the central bank's vice governor Yi Gang.

The central bank had taken a series of measures such as raising the reserve requirement ratio 11 times and the benchmark interest rates six times since last year to absorb excess liquidity and the measures had played an active role in slowing down the inflation growth.

Political advisors and lawmakers, however, have voiced their calls urging the government to take measures to protect the interests of low-income earners, who are affected most by the growing inflation.

"To provide low-income people a protective umbrella should be put on the top agenda of the government," said Jia Kang, a CPPCC member and director of the Research Institute for Fiscal Science under the Ministry of Finance.

"I believe the government will make greater efforts to solve social issues and improve people's livelihood through increasing fiscal revenue and making use of other resources," he said.

The CPPCC National Committee and the NPC will convene their annual full sessions on Monday and Wednesday respectively. Each will last more than 10 days.

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