China's inflation rate is expected to drop next year from its current five percent, according to the Asian Development Bank's annual development report, released on Wednesday.

The Consumer Price Index, or CPI, is a key parameter indicating rates of inflation. Statistics reveal China's CPI grew by 5.3 percent in August over the same period last year. The increase equals that of July, staying at its highest point since February 1997.

A leap in grain prices is the major cause of the increase. But some experts believe the increased cost of grain is not totally negative. They say it raises incomes levels for the rural population.

Analysts predict a gradual decline in China's CPI starting September as grain prices fall following a good harvest.

ADB Resident Rep. in China Bruce Murray said, "We expect the CPI actually by the end of this year to be less than five percent. And still less than five percent next year. So we are not expected to see a very large increase in inflation as for example China experienced during 1994. "

China fought its last battle against inflation in 1993 and 1994 due to a major investment boom. In November 1994, the country's CPI increase stood at a surprisingly high level of 27. 5 percent.

(CCTV.com)