THE country’s annual economic growth could accelerate to a 10.8 percent rate in the second quarter from 10.6 percent in the first, driven by expansion of investment and consumption, a government think tank said in a report published yesterday.
Annual consumer inflation may moderate to 7.5 percent in April to June from 8 percent in the first quarter, as supplies of meat, eggs and vegetables increase, the State Information Center said in the report.
The think tank falls under the State Council, or Cabinet.
With inflation running near 12-year highs at the same time that a U.S. slowdown threatens to dampen demand for Chinese exports, officials have said that they will seek to balance efforts to tame inflation with the goal of keeping growth strong enough to create sufficient jobs.
The research team said the government did not need to worry about growth slowing beyond its comfort zone this quarter, meaning its first priority for now should be to curb inflation.
“Inflation is the biggest threat to the current stability of the economy,” they wrote.
However, they noted that the government should also start to consider policies it could take to fend off a potential economic slowdown beyond the middle of this year.
Upside risks to prices include high global agricultural and oil prices, rapid growth in domestic money supply resulting in part from hot money inflows and upward pressure on domestic grain prices due to increases in production costs and use of grain for biofuels.
High industrial prices could also start to spill over into rising consumer prices, they said. The producer price index rose 8.0 percent from a year earlier in March, up from 6.6 percent in February.
The government should end its temporary price controls on consumer goods such as cooking oil, pork, eggs and dairy products, as their prices would stabilize on their own due to seasonal factors and increasing supply, the authors wrote.
“In the long run, price intervention will reduce the efficiency of resource allocation, and the costs of price distortion will exceed the benefits it brings,” they said. (SD-Agencies)
