July 7, 2011

 

 

The Chinese government is taking steps to ease inflation and "pork prices will start to drop in the coming months", Premier Wen Jiabao assured Tuesday (Jul 5).

 

Inflationary pressures are already restrained but are yet to be eliminated, he said in a statement published on the central government's website.

 

"Stabilising the general level of consumer prices remains the top priority of our macroeconomic regulation," Wen said during a visit to Northeast China's Liaoning province on Sunday and Monday. "Prices will be effectively controlled when government policies take effect."

 

Vice-Premier Li Keqiang also urged that prices be kept stable.

 

"(We must) cut logistics costs to help keep the overall stability of prices," he said during a visit to Anhui province. The rising prices of some products, such as vegetables, have been attributed to exorbitant transportation costs, calling for reforms of relevant fee-collecting policies.

 

He also called for "proper management of inflationary expectations", reports said.

 

China's consumer price inflation rose to a 34-month high of 5.5% in May from 5.3% in April. Economists forecast it could even exceed 6% in June, which would be the highest in about three years. The National Bureau of Statistics is scheduled to release the data next week.

 

"The peak of inflation could have come in June," said Lian Ping, senior economist at the Bank of Communications. "It will gradually drop in the second half of this year, although the decline will be limited," he said, citing the rising labour costs, brisk economic expansion and high international commodities prices.

 

Prices of food products are believed to have played a major role in driving up consumer inflation, with pork becoming the core element.

 

Pork prices rose 3.4% on-week in the week ending July 3, after an increase of 4.5% in the previous week, according to a Ministry of Commerce statement on Tuesday.

 

Prices have risen strongly since May - a traditionally slack season - mainly because of a cyclical domestic shortage of hogs and surging feed prices. Many farmers were reluctant to keep hogs due to low sales prices and diseases last year, causing a shortage of supply this year, experts say.

 

Year-on-year, pork prices rose about 54% at the end of May, according to a survey by the Ministry of Agriculture.

 

"However, the price of pork may have peaked in June, rising by about 60%," analysts said. "It could be the highest in this round of pork price rises."