Beijing think-tank plays down inflation fears
The mainland's economic growth will slow slightly to 11.4 per cent in the third quarter but the rising costs of consumer goods is unlikely to lead to full-blown inflation, a state think-tank said yesterday.
'Gross domestic product will grow at about 11.4 per cent in the third quarter, basically maintaining the same level of growth as in the first half but lower than the 11.9 per cent increase recorded in the second quarter,' the State Information Centre, a policy unit under the National Development and Reform Commission, forecast in a report published in the China Securities Journal.
GDP growth swelled 11.5 per cent in the first half, with expansion in the second quarter topping 11.9 per cent, the fastest since 1994.
Despite widespread fears of overheating, the State Information Centre said abundant capital and technological advances had pushed the economy into a new period of high-speed growth, suggesting that government officials regard accelerated growth as economically sustainable.
'The mainland's rate of potential growth has risen from 9 to 10 per cent previously to 11 to 12 per cent today. The space for growth has expanded,' the centre said.
The consumer price index, a common measure for inflation, was likely to hit 4.3 per cent in the third quarter, an increase of 1.1 percentage points on the first half, the report said.
After increasing at an alarming rate of 11.3 per cent in June, food prices would continue to rise but this would not have a major impact on other goods and services, it said.
'Although prices are rising relatively fast, the increase in the consumer price index has obvious structural characteristics and is unlikely to translate into overall inflation,' the report said.
Soaring costs of staple food items such as pork and eggs accounted for 80 per cent of the 3.2 per cent increase in CPI in the first half, with many non-food goods and services recording static or even falling prices.
However, Goldman Sachs estimated that CPI growth breached 5 per cent last month.
'The inflation impulse has quickly passed on from pork prices to prices of other primary agricultural products, processed food and catering services,' Goldman chief economist Hong Liang said in a research note this week.
'There has also already been growing evidence that inflationary pressure has spread to non-food products.'
Main ingredients
Staple food made up 80 per cent of the 3.2 per cent increase in CPI
The mainland GDP grew in the second quarter at the fastest pace since 1994 at: 11.9%
