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China's CPI to rise around 4 pct in 2012

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A customer is seen in a supermarket in Hangzhou, capital of east China's Zhejiang Province, Jan. 12, 2012. China's National Bureau of Statistics (NBS) said Thursday that the country's CPI rose 4.1 percent year on year in December of 2011 and it grew 5.4 percent on year for the whole 2011. (Xinhua/Ju Huanzong)

The overall price level in 2012 may see a downward trend, however, the consumer price index (CPI) is predicted to rise around 4 percent in China, according to the nation's lead economists.

Zhuang Jian, a senior economist with Asian Development Bank, anticipated that the overall CPI growth will stay around 4 percent, besides a certain degree of fluctuation in monthly figures.

As a result of diminishing carryover effects and the government's prudent monetary policy direction, CPI in China has been declining over the past five months, but price control remains a dominant topic right now.

China's CPI was up 5.4 percent in 2011 from the previous year, according to a statement issued by the National Bureau of Statistics (NBS).

Although the figure is well above the government's full-year control target of 4 percent, inflation has been slowing down in the second half of 2011 thanks to a series of government measures.

The monthly inflation rate in December 2011, which was at 4.1 percent, registered a decline in five consecutive months after hitting a 37-month high of 6.5 percent in July.

2012 CPI prediction

Economists believe that China's inflation will further subside in 2012 on weaker world commodity demand and previous monetary tightening measures, but they also expect long-term inflationary pressure to linger on.

Although divided on whether consumer prices will retreat rapidly or remain at high levels, they agree that the CPI growth has not yet reached a safe range.

Lian Ping, chief economist with China Bank of Communications, said the CPI in 2012 will reach around 3 percent, citing declining food prices -- which factor greatly in the CPI calculation -- as well as falling commodity prices on international markets and prior monetary tightening measures.

However, Liu Ligang, director of the economic research department of ANZ Greater China, expected the full-year CPI to hit 4 percent.

In view of individual cities and regions for example, Su Ranrong, an official with Guangxi's price bureau, said his region's CPI in 2012 is likely to hit 4 percent.

Central China's Henan province also aims to bring the CPI down to 4 percent in 2012 from 5.5 percent in 2011, said Zhang Weining, director of the provincial development and reform commission, or the local economic planner.

Zhang told a press briefing on the sideline of a session of the 11th provincial people's conference that Henan would try to maintain a stable price through sufficient supply of daily necessities, lowering transportation costs and cracking down on price manipulation.

"It is possible to fulfill the goal of keeping CPI at 4 percent this year," Zhang said.

First month��s CPI may be pushed up by festival

Some analysts believe that the first two months of the year will see a further retreat in the growth of consumer prices, but the volatility of international commodity prices, caused by geopolitical factors, will form new imported inflationary pressures..

Meanwhile, domestic factors, including rising agricultural production, resources, land and labor costs, will push up consumer prices in the mid- to long-term, said Lian Ping.

The NBS said a carryover effect from last year phased out in December, meaning that this month's year-on-year increase in CPI growth was created entirely by new price rises.

The increases in food prices were mainly caused by the upcoming Spring Festival holiday, as well as weather- and transportation-related factors, analysts believe.

No dramatic easing moves for 2012

As inflationary pressures remain, economicsts rule out the possibility of dramatic easing moves.

"Although the current inflation figure has eased, the country's monetary polices will not shift toward loosening, but will remain stable," said Zuo Xiaolei, chief economist at Galaxy Securities.

The same opinion is held by Lian Ping: "Since inflationary pressures remain in the mid- and long-term and a 'hard landing' is unlikely to happen, there is no need for significant policy adjustments.��

Lian's remarks in fact echoed the country's stance stated at the recently concluded central economic work conference. The government said it will preset or fine-tune its monetary policy in line with economic changes, indicating its intent to stabilize growth while avoiding price rebounds.

The easing inflation has provided room for the government to take measures to prevent an economic plunge. The country's central bank will cut banks' reserve requirement ratio (RRR) before the Spring Festival and make another two cuts in the first half of the year in an effort to ease the credit crunch among Chinese firms, according to Xinhua reports.

The People's Bank of China lowered the RRR by 50 basis points in December, its first cut in nearly three years.

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