China's inflation eases, but worries continue

Although China's inflation is believed to be easing amid a stabilizing economy, domestic resources and international commodity prices will still influence the general inflationary trend.

Analysts foresee China's April inflation, which is due to be released Friday, to land between 3.2 percent and 3.4 percent, slightly down from March's 3.6 percent.

Xu Guangjian, a professor at Renmin University, said inflationary pressure will not be serious this year, as the government's easing policies have begun to take effect.

A slowing money supply and cooling property prices have worked to stabilize consumer expectations, he said.

China is aiming to stabilize its economy and keep inflation within 4 percent this year after failing to meet its price control target last year.

The Consumer Price Index (CPI), a main gauge of inflation, increased 3.6 percent in March, slightly rebounding from a 20-month low of 3.2 percent in February.

A report compiled by the Chinese Academy of Social Sciences in late April estimated China will not miss its inflation target this year, as slowing exports and investment, stabilizing food prices and lower market demand have created favorable conditions.

Although inflation is not a short-term concern, economists have warned that domestic resource costs and international commodity prices will weigh on the long-term outlook.

Zhuang Jian, an economist with the Asia Development Bank, said China's resource product prices remain low, adding that the timing of pricing reforms may create concerns regarding the CPI.

China's government has major controls in place for the price of electricity, water, gas, refined oil and other key resources for production. In recent years, it has moved to loosen its grip and give market forces a bigger role, although it has been cautious abuot the timing of this move, as aggressive steps could fuel price hikes and endanger social stability.

Earlier this year, the government said it will speed up price reforms for refined oil and electricity in order to prevent low resource prices from preventing the fair allocation of economic resources.

In addition, global commodity prices and imported inflation will also affect China's domestic picture and cast uncertainty on the world's second-largest economy, experts said.

Since loose monetary policies have been implemented in the US, Europe and emerging economies, global liquidity remains abundant and is creating conditions for commodity price hikes.

Experts said the Chinese government's proactive fiscal policy and prudent monetary policy are necessary to maintain stable prices.