Raw material price hikes not to drive up CPI
(People's Daily Online)
Updated: 2005-03-28 15:51

The recent price hike in raw materials, fuel and power will not push up the prices of consumer goods in the near future, said an official with the State economic planner Sunday.

Addressing a forum on corporate management, Cao Yushu, deputy secretary general of the National Development and Reform Commission said that China is confident of keeping its Consumer Price Index (CPI) growth within four percent this year.

The country's Producer Price Index (PPI) jumped by 5.8 percent in January and 5.4 percent in February year-on-year, according to the National Bureau of Statistics.

"My study on China's price transmission mechanism showed, " said Cao, "when the country's total supply exceeds the total demand, it takes a long time for PPI growth to exert influence on CPI.

"Therefore, although the steel, crude oil and ironstone witness rapid price increases these days, China's CPI could maintain the steady growth, at least for the whole year of 2005," he said.

During this period, many industrial companies will see a squeeze on their profits, industry analysts said.

When supply falls short of demand, said Cao, PPI will start to show its effect on consumer prices.

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