China is likely to raise next year’s official inflation target and tighten monetary policy, state media said yesterday, amid expectations for consumer prices to continue rising.
The Central Economic Work Conference, which is expected to meet next month, will probably hike the government’s annual inflation target to 4 percent from 3 percent this year, the China Business News said, citing an -unnamed source.
The conference is the most important economic policy making event of the year and gathers top Chinese leaders, usually including Chinese President Hu Jintao (胡錦濤) and Chinese Premier Wen Jiabao (溫家寶).
The meeting is likely to set a “prudent” monetary policy for next year, compared with the expansionary stance adopted over the past two years to combat the impact of the global financial crisis, the report said.
The higher inflation target would help the government avoid using “very tough policy tools” that could hurt the world’s second-largest economy, said Shen Jianguang (沈建光), a Hong Kong-based economist with Mizuho Securities Asia.
Shen said inflation would “continue to go up because both food and non-food prices are surging and the momentum is hard to curb.”
Inflation could reach 4.8 percent year-on-year this month compared with 4.4 percent last month, which was the fastest pace in more than two years, Shen said. Ever fearful of inflation’s historical potential to spark unrest in China, Beijing has ordered a range of steps to ensure adequate supplies of key goods and offer financial help to the most needy.
The central bank last week ordered banks to raise the amount of money they must keep in reserve for the fifth time this year, after it announced last month the first interest rates hike in nearly three years.
The moves to contain rising inflation came after prices of some vegetables rocketed more than 60 percent this year, sparking complaints from struggling consumers.
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