Premier Wen Jiabao may struggle to keep inflation at his 2010 target of about 3 percent, after banks flooded the Chinese financial system with money to drive the nation s economic rebound.
Inflation may peak at 4.4 percent during the year, according to the median forecast of 14 economists surveyed after Wen gave the goal in a speech to lawmakers in Beijing.
Three percent is a fairly aggressive target and it suggests that the government will need interest-rate increases and price controls to achieve it, said Ma Jun, a Hong Kong- based chief China economist at Deutsche Bank AG.
China will need to raise benchmark interest rates as early as this month to curb inflation expectations and prevent the interest on bank deposits being outstripped by price gains, according to Standard Chartered Bank. Wen pledged to counter property speculation and keep price levels stable as he affirmed a moderately loose monetary policy in his annual report to lawmakers.
The full-year inflation rate may be 3.4 percent, the survey of economists showed. Price pressures include higher commodity costs, resource-price reforms, and the spillover from last year s rapid credit growth, the National Development and Reform Commission said in a report to the National People s Congress.
A reporter at a press briefing in Beijing asked central bank Governor Zhou Xiaochuan what tightening measures would be used to meet the inflation target. Zhou said it was very difficult to forecast economic indicators at the start of the year and monetary policies would need dynamic adjustment.
Premier Wen s report has also specially stressed the need to keep policy flexible, Zhou said. The central banker also said China needed to be very cautious in timing its exit from special policies, including for the yuan, adopted to counter the financial crisis. The Chinese currency has been effectively pegged to the dollar since July 2008.
The People s Bank of China has twice this year raised lenders reserve requirements, draining cash out of the financial system to reduce the risk that the world s fastest-growing major economy will overheat.
Wen warned of excessive property-price gains and latent risk in China s banks after a record 9.59 trillion yuan ($1.4 trillion) of lending last year.
Inflation may peak at 4.4 percent during the year, according to the median forecast of 14 economists surveyed after Wen gave the goal in a speech to lawmakers in Beijing.
Three percent is a fairly aggressive target and it suggests that the government will need interest-rate increases and price controls to achieve it, said Ma Jun, a Hong Kong- based chief China economist at Deutsche Bank AG.
China will need to raise benchmark interest rates as early as this month to curb inflation expectations and prevent the interest on bank deposits being outstripped by price gains, according to Standard Chartered Bank. Wen pledged to counter property speculation and keep price levels stable as he affirmed a moderately loose monetary policy in his annual report to lawmakers.
The full-year inflation rate may be 3.4 percent, the survey of economists showed. Price pressures include higher commodity costs, resource-price reforms, and the spillover from last year s rapid credit growth, the National Development and Reform Commission said in a report to the National People s Congress.
A reporter at a press briefing in Beijing asked central bank Governor Zhou Xiaochuan what tightening measures would be used to meet the inflation target. Zhou said it was very difficult to forecast economic indicators at the start of the year and monetary policies would need dynamic adjustment.
Premier Wen s report has also specially stressed the need to keep policy flexible, Zhou said. The central banker also said China needed to be very cautious in timing its exit from special policies, including for the yuan, adopted to counter the financial crisis. The Chinese currency has been effectively pegged to the dollar since July 2008.
The People s Bank of China has twice this year raised lenders reserve requirements, draining cash out of the financial system to reduce the risk that the world s fastest-growing major economy will overheat.
Wen warned of excessive property-price gains and latent risk in China s banks after a record 9.59 trillion yuan ($1.4 trillion) of lending last year.
