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Beijing expectso inflation to remain at around 4 percent

Inflation in China is expected to remain high this year but within the target level of 4 percent, state press reported yesterday, citing China central bank deputy director Wu Xiaoling (吳曉寧).

"As a result of increases in prices of raw materials, land and labor along with increases in the cost of production that have been passed along, there has been high inflation pressure," Wu said in a Shanghai Securities News report.

However, despite this, inflation should be controlled around 4 percent this year, Wu said.

Chinese Premier Wen Jiabao (溫家寶) at the close of the country's annual parliamentary meeting last week set the country's annual inflation target at the same level.

China's consumer price index (CPI) rose 3.9 percent last month from a year earlier, picking up far more sharply than expected after a slowdown in January.

For January, the CPI had risen only 1.9 percent as inflation progressively cooled from the high of 5.3 percent seen in the middle of last year and after 2.8 percent in December.

Wu also told the newspaper that in the first two months of the year "yuan bank loans in circulation and the overall economic situation were stable."

At the same time, Wu stressed that China must control the volume of loans being made to the real estate sector and that the industry must go to the capital markets if it seeks to raise funds.

China's central bank announced last week it would hike interest rates on home loans to cool an overheated housing market in major cities such as Beijing and Shanghai. State-run newspapers reported yesterday that authorities were now in the process of identifying which cities the new regulations would apply to.

The bank plans to raise the minimum rate for a mortgage loan of more than five years to 5.51 percent from 5.31 percent, while banks have been told to increase increase downpayments to 30 percent of a property's value instead of the current 20 percent.
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