CONSUMER demand will continue to surge in the next few months making it extremely difficult for Beijing to bring inflation under control, a group of Chinese government economists have warned. The group of experts from the State Planning Commission (SPC) has predicted that nationwide retail sales will increase by about 22 per cent this year with demand still outstripping supply by a dangerous margin. Retail sales in the first half of the year totalled 639 billion yuan (HK$856 billion), an increase of 21.6 per cent over the same period last year and the experts see little evidence that the growth rate will decline in the second half of this year. The total for retail sales this year is expected to top 1,350 billion yuan. But if the inflation factor is taken into consideration, real growth in retail sales will be about 10 per cent. An SPC official said the reason for the continued growth in consumption in the second half was partly seasonal as workers receive their bonuses at the end of the year and prepare for festivals. A survey by the Ministry of Domestic Trade showed that about 10 per cent of all major consumer items were in short supply in the first half of this year and the SPC experts warned that conditions could actually worsen next year. In particular, they said production of agricultural products such as grain, cotton, oil, pork and eggs would probably not be able to keep up with growing consumer demand. The rapidly growing demand for agricultural goods from China's increasingly affluent urban consumers has placed a considerable strain on the farming community and, despite government efforts to boost agricultural production, the gap between supply and demand continues to widen. ''The contradiction between [agricultural] supply and demand could gradually intensify next year,'' the SPC economists said. With the liberalisation of the agricultural price structure this year, higher demand will inevitably lead to higher prices for urban consumers, they said. The SPC report also warned that high-quality manufactured goods and textiles, along with imported household electronics would continue to be in short supply leading to even higher prices in the shops. Urban inflation is presently running at more than 20 per cent and if the SPC experts' predictions prove correct, there is unlikely to be any let up throughout the remainder of the year. The report pointed out that capital investment, money supply, bank loans, urban incomes and raw material prices were all increasing at an alarming rate and that it would be difficult to regain control of the situation in the short term. ''All these factors cannot be beneficial to the stability of the market,'' the report said. The experts recognise for the first time what several Western economists have been telling the Chinese Government for the past six months - that Beijing will not be able to rein in economic growth unless it tackles the demand side of the equation instead of simply concentrating on curbing excessive production. ''I'm glad to see they are finally waking up to the problem of excessive domestic demand. However, I still have not seen much evidence they are actually doing anything about it,'' a Western financial analyst based in Beijing said. Beijing has issued regulations restricting urban wage rises to only those state-run enterprises which make an operating profit but it remains to be seen if loss-making enterprises will heed the directive and refrain from giving out bonuses and wage increases to their employees to cover the cost of inflation. It is feared many loss-making enterprises will continue to pay bonuses, in spite of the directive, to prevent unrest and instability in the workplace. China's central bank expects fast growth in money supply during the rest of this year, the official Financial News reported. Demand for cash from key state construction projects as the year ends and the need to purchase bumper autumn harvests will push up the growth rate, the newspaper quoted Vice-Governor of the People's Bank of China Zhu Xiaohua as saying. The rapid increase in money supply is likely to drive up inflation, which hit 22.2 per cent in large cities on an annual basis in August.