Premier warns of inflationary pressure

Chinese Premier Wen Jiabao (溫家寶) and central bank governor Zhou Xiaochuan (周小川) have warned that over-investment and inflationary pressures are putting the country's economy at risk, state press reported yesterday.

In the latest remarks expressing rising concerns among China's political elite about an inflationary crisis similar to that seen in the mid-1990s, Zhou said that increases in the consumer price index (CPI) suggest that China's economy is facing price pressures.

He asserted that "measures would be taken to prevent it" and warned that any further rises in prices would create problems for the central bank in controlling inflation, the Shanghai Securities News quoted him as saying.

China's main economic problems this year are inflation and over-investment, and "power and transportation shortages," he said.

In a separate article, Wen also warned about the impact of over-investment and was quoted as saying that the government will take measures to prevent inflation and work to ease the shortages in raw materials, energy and transportation.

The latest warnings from the top tier of government are likely to add to speculation about how China plans to tackle the excesses of its roaring economic growth levels.

China's CPI reading hit 3.2 percent last month, its highest level since 1997, while producer prices also rose sharply.