Tags: OECD | Chinese | china | Inflation

OECD: Chinese Inflation to Stabilize at 3 Percent

Thursday, 18 Nov 2010 03:46 PM

Inflation in China will level off slightly above 3 percent as rising import prices offset a likely decline in food price inflation, the OECD said on Thursday.

Although the Organization for Economic Co-operation and Development noted risks if a weak currency combined with high commodity prices, stabilization of inflation at about 3 percent would be more than acceptable to the Chinese government, which is now worried about mounting price pressures.

In its semi-annual Economic Outlook, the OECD also said that China's growth was picking up thanks to a turn in the inventory cycle and would remain buoyant for the coming two years.

The annual rate of growth will reach 10 percent in the fourth quarter, up from 9.6 percent in the third quarter, making for full-year growth of 10.5 percent, the Paris-based organization said.

It forecast that the Chinese economy would expand by 9.7 percent in both 2011 and 2012. That is more bullish than the median forecast for 8.9 percent growth next year in a Reuters poll of economists.

The OECD noted that while China's counter-crisis stimulus plan was coming to an end, public investment was not about to drop off because the government would ramp up spending on public housing, healthcare and initiatives promoting urbanization.

Rising incomes will also support private consumption, it said.

"Overall, domestic demand should accelerate in the projection period, while export growth moderates as the expansion of world trade eases back to trend," the report said.

Consumer price inflation rose to a 25-month high of 4.4 percent in the year to October and it is on track to breach the government's full-year target of a 3 percent average.

The OECD forecast that inflation would hit 3.1 percent this year, 3.3 percent next year and 3.0 percent in 2012.

"Continued weakness of the currency and strength of commodity prices could generate higher inflation," it said.

The OECD noted that the yuan's effective exchange rate had weakened despite modest appreciation against the dollar since it was lifted from a de facto bilateral peg in June.

"The stability of the domestic economy would be enhanced if exchange rate policy were more oriented to allowing an appreciation against a basket of currencies," it said.

© 2017 Thomson/Reuters. All rights reserved.

   
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Inflation in China will level off slightly above 3 percent as rising import prices offset a likely decline in food price inflation, the OECD said on Thursday. Although the Organization for Economic Co-operation and Development noted risks if a weak currency combined with...
OECD,Chinese,china,Inflation
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2010-46-18
Thursday, 18 Nov 2010 03:46 PM
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