• search

Researchers see Chinese 2006 inflation at 1 pct

Written by: Staff

BEIJING, Apr 2 (Reuters) Chinese consumers will pay only 1 percent more for goods and services in 2006 as overcapacity pushes inflation down from last year's 1.8 percent, government and university researchers said in a report published on Sunday.

Deflationary pressures were rising, the team from the National Bureau of Statistics and Peking University said in a report carried by the Xinhua news agency.

''Inflationary pressure is probably less than deflationary pressure, so consumer inflation will continue to moderate,'' the researchers said.

''Judging from current price trends, inflationary pressure is not dominant in China,'' they said. ''On the contrary, deflationary pressure is strengthening.'' The researchers did not expect consumer prices to begin falling, thanks to China's rapid economic growth, but they would be only about 1 percent higher this year than last year.

Like other economists looking for reasons for deflationary pressure, the researchers pointed at an excess of productive capacity over demand from consumers, the result of overinvestment that the government has been trying to tame for several years.

But behind that overcapacity was a more fundamental reason: serious distortions in prices for economic resources caused by the absence of market-driven price systems.

The Xinhua report did not elaborate, but the Chinese economy has many examples of resources available at lower prices than would be on offer in a fully developed market system.

Government regulation holds down prices of electricity and automobile fuel, and developers often get land very cheaply from local governments that seize it from farmers, who complain that they lose their livelihoods without fair compensation.

State businesses have traditionally obtained capital cheaply from government-owned banks ordered to lend to them.


For Daily Alerts

For Breaking News from Oneindia
Get instant news updates throughout the day.

Notification Settings X
Time Settings
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Oneindia sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Oneindia website. However, you can change your cookie settings at any time. Learn more