China's consumer price index (CPI) is expected to rise by about 4 percent this year, according to the National Development and Reform Commission of China's Price Monitoring Center.

In a report released this week, the center predicts that the continuous rise of production costs will drive the further increase of consumer prices. The prices of capital goods in China have risen by 26.3 percent over the past three years.

The report says possible price increases in urban public service sectors and international markets and the devaluation of the US dollar could fuel China's CPI increase. If the international oil price remains high or goes higher, the report says, the country's consumer prices are also likely to climb higher.

China's retail prices will rise by about 2.5 percent in 2005, as the prices of capital goods will "maintain an obvious rising momentum," the report predicts. However, it says the increase willbe "definitely less" than in 2004.

China, which witnessed a continuous deflation and constant CPI decreases in 2001 and 2002, encountered a major increase of food prices in September 2003. The country's CPI increased by 5.3 percent year-on-year in July 2004, the highest rise since 1997.

Source: Xinhua