China is bracing for higher inflation due to the rising
costs of oil and other raw materials, with authorities also phasing in price
hikes for electricity and water, state press said.
This file photo shows afternoon traffic along Beijng's 2nd
Ring Road. China is bracing for higher inflation due to the rising costs
of oil and other raw materials, with authorities also phasing in price
hikes for electricity and water. [AFP] |
"The price rises of raw materials have increased costs for producers and will
eventually push up prices of finished products," the China Daily quoted Zhu
Hongren, a top official at the National Development and Reform Commission, as
saying.
"It's one of the problems China faces besides the spree of fixed assets
investment."
Crude oil prices are 40 percent higher than July last year and copper more
than double a year ago, Zhu pointed out.
China's consumer price index rose 1.4 percent in the second quarter of the
year compared with the same period in 2005, official data released Tuesday last
week showed.
The index -- the main gauge of inflation and a key factor in determining the
temperature of the economy -- was up 1.5 percent in June alone, the National
Bureau of Statistics said.
The consumer price index for the first six months climbed 1.3 percent, when
the economy grew by 10.9 percent, according to the bureau.
These rates are low by most standards and some analysts have said they could
reflect the pressure of oversupply and overcapacity in the Chinese economy.
However, inflation has been picking up slowly and the rise in prices for oil
and many commodities has been so sharp and sustained that many believe it will
inevitably lead to sharper price increases to come.
Energy and water prices were set to rise throughout the country due to the
general problem of resource shortages, aside from the immediate concern of
higher prices, the China Daily said in a separate editorial.
"Increased power and energy prices are inevitable as the Chinese
economy increasingly tests its resource and environmental limits," the editorial
said.
"To prepare the country for such energy challenges, all businesses must be
urged to improve their energy efficiency as much as possible. Higher power
prices should serve to encourage them to undertake otherwise painful reforms."
Many areas across the country have already introduced some price hikes as a
way to encourage water conservation and ease water shortages, according to
various state press reports this week.
From China's western-most Xinjiang region, to Shaanxi province in the north
and Guangdong in the south, water prices have risen between 15 to 23 percent
recently, the reports said.