Economy

China faces high inflation pressure in 2011

(Xinhua)
Updated: 2011-01-07 20:22

Hong Kong - The Chinese mainland would be facing high inflationary pressure in 2011, possibly the highest in 11 years, a Hong Kong-based economist said Friday.

Ma Jun, Deutsche Bank's chief economist for China, told a seminar that he expected the mainland's consumer price index (CPI), the main gauge of the inflation, to rise to 4.4 percent in 2011, from about 3.3 percent in 2010.

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Ma said the inflation rate could peak at around 5.5 percent year-on-year in the second quarter of 2011, which would be followed by disinflation at the end of the year.

He attributed rising inflation rate mainly to the rise of rental prices, labor cost, raw material and agricultural product prices.

The upside risks of inflation in the mainland in 2011, according to Ma, included bad weather conditions, increase in money velocity due to inflation expectations, higher global commodities prices and unsuccessful government policies.

"In case CPI inflation reaches 6 percent to 7 percent, draconian measures will be needed to tighten the economy or broad-based price controls will be implemented," he said.

Ma also forecast the Chinese gross domestic product (GDP) is likely to expand 8.7 percent in 2011 from the estimated 10 percent growth in 2010, due to the decreased amount of exports.

The export growth rate is projected to be 15 percent this year, down from the 31 percent for 2010, he added.