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PRC optimistic on inflation, but orders officials to be alert

China’s top economic planning agency said yesterday that there was no imminent threat of a spike in inflation, but urged officials at all levels to be alert to sudden price rises.

The statement from the National Development and Reform Commission came as the world’s third-largest economy showed more signs that it was emerging from the global crisis, with concerns surfacing of a return of inflation.

“Basically, overall supply and demand in the economy are in balance,” the commission said in a statement posted on its Web site. “At the moment, there is no risk of a comprehensive, lasting and large-scale rise in the price level.”

But at the same time, the commission warned a recent pick-up in important sectors of the economy had prompted many Chinese to expect future price rises.

“Inflationary expectations ... have strengthened as the prices of a small number of commodities have gone up, while bank loans have risen and stock prices have rebounded,” the commission said.

Inflationary expectation can by itself lead to new inflation, as people predicting future price rises demand higher pay, in turn making products more expensive.

“Officials at all levels should ... help detect symptoms such as abnormal price hikes in the market in a timely manner,” the commission said.

China’s consumer price index, the main inflation gauge, has fallen six months in a row, dropping 1.8 percent last month from a year earlier. However, signs of a recovery of China’s export-dependent economy have triggered new warnings that inflation could be imminent.
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