By Fu Jing (China Daily)
Updated: 2007-07-26 08:34

Consumer prices in China are projected to grow at a slower pace in the second half of this year after rapid increases from January to June, an official from the National Development and Reform Commission (NDRC) said yesterday.

The level of the increase in the months ahead will depend on the harvest of farm products this autumn, as food has been the main factor driving this year's rise in the consumer price index (CPI), said Cao Changqing, the NDRC pricing director.

His projection came following a 3.2 percent CPI growth in the first six months and a 4.4 percent rise in June, the most rapid increase in 34 months. Up to 78 percent of the jump in the first six months was due to rising food prices.

"We feel that prices are now climbing slowly, in a relatively steady manner," Cao said.

He added that the nation's grain reserves are adequate.

China's Agriculture Minister Sun Zhengcai recently forecast a fourth consecutive bumper harvest this year, and expects to meet the annual target set for 2010, three years ahead of schedule.

The NDRC said the government's main role is to prevent the economy from overheating.

Zhu Hongren, deputy director of the macroeconomic development department under the NDRC, said the government will use economic and legal policy tools to cool the growing pace of the economy.

Accelerating inflation also pushed real interest rates further into negative territory, prompting regulators last week to raise interest rates and slash taxes on interest income from bank deposits.

China's gross domestic product expanded by 11.9 percent in the second quarter and by 11.5 percent in the first half of the year. Fixed-assets investment in urban areas jumped 26.7 percent in the first half over a year earlier, up from 25.3 percent in the first quarter, while industrial output climbed 19.4 percent in June.