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Economists say inflation controllable in 2011
Date:2011/1/26      View:1168
Chinese economists believed inflation would be controllable this year, but warned of stagnation, in exclusive interviews with Xinhua.

Inflation will be generally "controllable" this year, as prices have mainly soared in agricultural products, vegetables and grains, and have not spread widely, said Ba Shusong, a researcher with the Development Research Center of the State Council.

Additionally, inflation will remain high in the first half of this year, but a slowdown is expected in the second half, said Zhu Jianfang, chief economist with CITIC Securities, forecasting about 4 percent of inflation in the first half and 3 percent in the second half.

China should watch out for stagflation this year, judging by aggravating inflation, increasing risks in local government debts, property bubbles in certain cities and widening income gaps, said He Keng, deputy head of the Financial and Economic Affairs Committee of the National People's Congress.

Stagnation usually shows up when there are high inflation, high jobless rates and low growth, He said.

The current inflation was pushed by increasing costs in four sectors, including raw materials, agricultural products, labor, and land and property prices, said Li Yining, a famous economist in China.

Zhu believed rich liquidity was the reason for inflation last year, as well as soaring prices of international commodities.

Ba also attributed the inflation to soaring vegetable prices in the fourth quarter of last year, though he expected prices to stabilize this year.

Further, inflation could be checked with stable monetary policies, though it needs time to cool down, Zhu said.

Gao Shanwen, chief economist with Essence Securities, said the function of stable monetary policies to check inflation was impeded by climbing labor costs.

Fan Gang, a well-known economist in China, said as a huge raw material importer, China should speed up yuan appreciation, as it could help reduce prices and adjust economic structures.

Yuan appreciation would cut import prices, but might draw more inflows of global money by sending signals that the Chinese currency's appreciation would be stable and without risks, said Liu Yuanchun, deputy head of the School of Economics of the Beijing-based Renmin University of China.

China's consumer price index (CPI), the main gauge of inflation, rose 4.6 percent in December 2010 from one year earlier, and 3.3 percent for the entire year, surpassing the government's annual target of 3 percent inflation.
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