China is expected to face further inflationary pressure this year as the 71.5 percent international iron ore price increase will push the consumer price index (CPI) higher, an expert with the National Development and Reform Commission (NDRC) has warned.

Wednesday's China Securities News quoted Liu Manping, an expert with the Price Monitoring Center of the NDRC, saying that a price monitoring report on the country's 63 steel trading markets showed that the prices of 11 kinds of steel products rose average 243.5 yuan per tons at the end of March this year an increase of 8 to 10percent in the last month.

As the price of iron ore is expected to increase 210 yuan per ton this year, China will have to pay an additional 43 billion yuan (5.18 billion US dollars) to import the same amount of iron ore as it did last year, Liu told the paper.

The price hike of steel will surely affect the construction, machinery, light industry, automobile, shipping, transportation and chemical industries, he said. This is likely to push the CPI, the country's main measure of inflation, higher.

China set a goal at the beginning of this year to keep CPI growth within four percent. The CPI in the first two months of 2005 rose 2.9 percent year-on-year, 3.9 percent in February.

In order to accomplish this year's CPI growth target of 4 percent, the NDRC issued a circular on April 4 requiring local governments to take measures to check any rapid rise in prices and to keep track of price fluctuations of important consumer goods, including grain, chemical fertilizer, oil products, coal and steel.

The document demands that if the year-on-year CPI growth for an area hits 4 percent and lasts for three consecutive months, the local government must not raise any prices in the following three months. If the chain CPI growth over the previous month surpasses 1 percent, the rule will also apply.

China imported 115 million tons of iron ore in 2002, 148 million tons in 2003 and 208 million tons in 2004, according to government statistics.

Source: Xinhua