China Can Endure Inflation Up to 6 Percent

With the present GDP growth rate between 9 to 10 percent,China could bear an inflation rate up to 6 percent,but should make greater efforts to increase people’s incomes,experts said at the Seventh China Private Enterprises Investment and Development Forum over the weekend.

“Given its rapid economic growth,China can bear an inflation rate of between 5.5 percent and 6 percent,”Yuan Gangming,a researcher in macroeconomics with the Institute of Economics under the Chinese Academy of Social Sciences(CASS),said at the forum.China’s CPI(Consumer Price Index)and GDP rose five percent and 9.7 percent respectively in the first quarter from a year earlier,nearing their average level over the past 31 years.

Liu Yingqiu,director of the Center for Private E-conomy Studies under the CASS,explained that over the past 31 years,the average CPI growth rate in China was nearly six percent,and its GDP growth rate basically fluctuated between 9.87 percent and 10 percent,indicating that China’s development was healthy and balanced.

“Inflation was an inevitable by-product of sustained and rapid economic growth,high employment rate,high income level,and wide social security coverage,”Yuan said.When the growth of CPI and GDP maintained a good balance,consumer price increases could not be simply considered a bad thing.

Zuo Xiaolei,chief economist at China Galaxy Securities,also believed that an inflation rate of six percent was bearable,but she noted at the same time that it did not mean everyone could accept the six percent inflation since not everybody had enjoyed a nearly 13 percent income growth.Low-income people,especially those who live on social security,have seen little,if any growth in their income.

Therefore,it is very important to build a sensitive subsidy mechanism.The Chinese government formed such a mechanism before the National People’s Congress(NPC)and Chinese People’s Political Consultative Conference(CPPCC)this year,in hopes ofprovidingsubsidiestolow-incomepeople promptly when the inflation reached a certain level.The three economists agree that the most reasonable range for the annual CPI growth rate in 2011 will be three to six percent.As for the annual GDP growth rate,the range will be between 9 percent and AU numbers percent.