Inflation remains a concern

PUBLISHED : Thursday, 11 January, 1996, 12:00am
UPDATED : Thursday, 11 January, 1996, 12:00am

CHINA is trumpeting its success in cooling the economy, and a watchful eye is being kept for when it will ease credit controls.

After a credit squeeze lasting more than two years, combined with administrative intervention and better law enforcement, runaway inflation has been reined in.

National retail price inflation has continued its downward spiral, month-on-month rates falling from 21.2 per cent at the start of 1995 to 8.5 per cent at the end of the year. The annual inflation rate of 14.8 per cent was within the official target of 15 per cent, and compares to 21.7 per cent in 1994.

However, the consumer price index, which stayed at a relatively high 17 per cent for last year, remains a concern.

The retail price index covers a variety of retail goods and daily necessities and is weighted heavily on foodstuffs.

The consumer price index is a wider measure including transport, utilities and rent.

The consumer price index is unlikely to come down significantly this year in view of the substantial increases in most cities' public transport systems.

Fixed asset investment, a major factor in surging growth and inflation, was kept in check.

Its growth dropped 12 percentage points over 1994 to 19 per cent, with total investment hitting 1.9 trillion yuan (about HK$1.77 trillion) last year.

Gross domestic product rose by 10.2 per cent in real terms to 5.77 trillion yuan last year.

It was 1.6 percentage points down from 1994 but was slightly higher than the 8 per cent to 9 per cent target set by premier Li Peng in his report to the National People's Congress.

Chief economist of the State Statistical Bureau Qiu Xiaohua said this year's inflation would stabilise at 12 per cent and gross domestic product would grow by 9 per cent to 10 per cent.

Government officials have warned that there are still difficult times ahead.

Cash-strapped state enterprises are waiting for the government to relax its credit control.

Last year, 40 per cent of state enterprises were in the red, up one percentage point over 1994.