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China's 2012 CPI to ease further, inflationary pressure remains: analysts

(Xinhua)

13:24, January 03, 2012

BEIJING, Jan. 3 (Xinhua) -- China's inflation will further subside in 2012 on weaker world commodity demand and previous monetary tightening measures, analysts have said.

However, analysts also expect long-term inflationary pressure to linger on, urging authorities not to let their guard down.

"Price rises will slow down markedly in 2012 as the economy downshifts, food prices retreat and imported inflation tapers off," according to the Bank of China's 2012 first-quarter economic outlook report.

The report predicted that the consumer price index (CPI), a main gauge of inflation, will rise around 3.5 percent in 2012.

It forecast the gross domestic product (GDP) value to grow about 8.8 percent, further moderating from 9.1 percent in the third quarter of 2011.

Zhuang Jian, a senior economist with Asian Development Bank, anticipated a downward trend in the overall price level in 2012 as a result of diminishing carryover effects and the government's prudent monetary policy direction.

"There might be a certain degree of fluctuation in monthly figures, but the overall CPI growth will stay around 4 percent," he said.

Lian Ping, chief economist with 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.

The central bank had hiked banks' reserve requirement ratio (RRR) six times and the benchmark interest rate three times in 2011 to fight inflation before cutting the RRR by 50 basis points in December.

Despite easing inflation, long-term pressures remain, forcing policy makers to keep an eye on price rises.

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