China's consumer prices up 1.8% in April
By Su Bei (China Daily)
Updated: 2005-05-17 07:09

China's consumer prices showed a 1.8 per cent year-on-year rise in April, the National Bureau of Statistics said yesterday.

The consumer price index (CPI), a key inflation measurement, was at its lowest since September 2003, when it rose by 1.1 per cent year-on-year.

For the first four months, the CPI rose by 2.6 per cent compared to a year ago.

Zhu Jianfang, an economist at Beijing-based China Securities, said last month's CPI was lower than expected.

"It was mainly because of the falling grain prices and a high base of comparison in 2004," he said.

Grain prices dropped by 1.7 per cent in April compared to same period last year.

"The CPI will not slow further," Zhu said. "It is likely to rebound in May and June."

"The possibility of a further interest rate rise also exists," he said.

There is room for the central bank to raise interest rates, since the savings deposits rate is still in a negative area, he said.

Fast economic development and the higher housing and producer prices would also make it possible for the government to raise interest rates, he said.

Qi Jingmei, a senior economist at the State Information Centre, said April's CPI movement was in the right direction, which the government wanted to see.

But a single month's CPI does not reflect the trend for the whole year, she said.

China's CPI had reached a seven-year high of 5.3 per cent in July and August last year. Last year's CPI stood at 3.9 per cent, below the government's target of 4 per cent.

Zhuang Jian, a senior economist at the Asian Development Bank, said last month's CPI figure was reasonable.

"It suggests the government's measures to bring inflationary pressure under control have taken effect," he said.

The National Development and Reform Commission said last month that local governments in areas where the CPI rose by more than 4 per cent year-on-year for three consecutive months or 1 per cent month-on-month were not allowed to raise prices for public utilities such as water and electricity.

However, Zhuang said the country is still facing inflationary pressure in terms of public utilities, raw materials, oil imports and property.

"Local governments have a strong desire to raise public utility rates," he said. "April's lower CPI gives local governments opportunities to raise utility prices."

The rise in utility rates would lead to rises elsewhere, he said.

Last month, the prices for raw materials, fuel and power rose by 9.9 per cent year-on-year, while the producer price rose by 5.8 per cent.

Zhuang said the higher producer prices could push the CPI up more quickly.

(China Daily 05/17/2005 page10)

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