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 "There is concern as to whether China can rein in inflation and
sustain its rapid development. My answer is an emphatic yes,"
Premier Wen Jiabao wrote in a commentary Friday in London's
Financial Times. He left Friday for an official visit to Britain,
Germany and Hungary.
Inflation jumped to a 34-month high of 5.5 percent in May, driven by
a double-digit rise in politically sensitive food costs. The
country's planning agency said this week the June rate was expected
to be higher than that.
Beijing declared controlling soaring living costs its priority this
year and has been embarrassed as inflation climbed steadily despite
four interest rate hikes since October and curbs on bank lending and
investment.
Inflation is politically dangerous for the ruling Communist Party
because it erodes economic gains that underpin the party's claim to
power. Food costs are especially sensitive in a nation where poor
families spend up to half their incomes to eat.
"China has made capping price rises the priority of macroeconomic
regulation and introduced a host of targeted policies. These have
worked," Wen wrote. Analysts blame stubbornly high prices on the dual pressures of
higher demand fueled by rising incomes that is outstripping food
supplies and a flood of bank lending as part of Beijing's response
to the 2008 financial crisis.
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The investment bank Nomura said in a report this week that June
inflation might reach 6 percent after flooding in China's east and
south damaged crops and pushed up prices of vegetables, fruit and
pork.
The Cabinet planning agency, the National Development and Reform
Commission, said Wednesday the June's price rise "will be higher
than May," but gave no target. The agency said inflation should
decline in the second half of the year.
"The overall price level is within a controllable range and is
expected to drop steadily," Wen wrote. "We are confident price rises
will be firmly under control this year."
[Associated
Press]
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