In the first quarter of 2005, the growth of consumer price index (CPI) in China was kept under control yet still, attention should be paid on inflationary pressure, according to a report issued by the People's Bank of China on the implementation of fiscal policy in the first quarter on May 26.

It is initially predicted that CPI in the second and third quarters will remain stable as compared with the same periods last year, while the fourth quarter will see a slight rise. The CPI growth in the whole year will be controlled below 4 percent as targeted.

CPI rose 2.8 percent year-on-year, almost at the same level as the previous year. Only Hubei, Hunan, Guangxi and Sichuan provinces and autonomous regions saw a growth rate of over 4 percent year-on-year.

The report says, currently the pressure of inflation on China is mainly concentrated in three aspects: first, the pressure of price adjustment in public utilities such as water, electricity, fuel and urban transport; second, the of price hike of crude oil and major raw materials in international markets that causes price rise of down-stream products; third, the pressure of rising labor costs.

China's fiscal policy was severely challenged due to the trade surplus and over-rapid growth of foreign exchange reserve in the first quarter, according to the report.

On real estate sector, the report indicates, in the first quarter, the average growth rate of housing prices in 35 big and medium-sized cities was 9.8 percent, 2.1 percentage points higher than the same period last year. The growth rate in eight of the 35 cities, namely Shanghai, Hangzhou, Chengdu, Xiamen, Qingdao, Ningbo, Nanjing and Wuhan, was higher than 10 percent.

In the first quarter, RMB six billion yuan was invested in economical housing, accounting for 2.6 percent of the total investment in real estate, down 13.8 percent and 1.2 percentage points year-on-year respectively.

Since China strengthened and improved macro-regulations, the supply of M2 witnessed a steady slowdown in its growth: 13-15 percent in eight months successively, which was compatible with the economic growth. Compared with the same period last year, financing loan took a larger share in domestic non-financial institutions while other means of financing dropping. The proportion of loan, government bonds, enterprise debt and equity financing is 98.8: 0.2: 0.2: 0.8.

By People's Daily Online