China will continue its tightening policies to control surging consumer prices as the nation's economy maintains steady and moderate growth. Experts anticipated at least one interest rate hike within the year.
"Stabilizing prices remains the top priority for our macro-regulatory policies," Chinese Premier Wen Jiabao said on Monday. The government needs to cool down consumer prices while avoiding major fluctuations in the country's economic growth.
The consumer price index (CPI), a major gauge of inflation, rose 5.4 percent year-on-year in the first half, the statistics bureau said in Beijing Wednesday.
Moreover, the gross domestic product (GDP) expanded 9.6 percent to 20.45 trillion yuan in the first half from a year earlier, the agency said. The number is much lower than the 11.1 percent growth rate recorded in the same period one year ago.
Data simultaneously released also showed the nation's economy grew at a slightly slower pace in the latest quarter – from April to June – compared with the previous one. Economic growth was down from 9.7 percent in the three-month period ending on March 31, to 9.5 percent in the quarter ending on June 30.
The 9.5 percent growth is still a little higher than anticipated by economists, which means the country is still maintaining economic momentum while grappling with inflation pressure. A survey of 18 economists conducted by Bloomberg News had expected the growth to be 9.3 percent, while Dow Jones Newswire economists had anticipated 9.4 percent.
"Today's data indicated that the slow down of the economy is moderate and the government’s macro-control measures have taken primary effect," said Lian Ping, chief economist at the Bank of Communications.
Peng Wensheng, chief economist at China International Capital Corp, said economic growth will continue to decline in the second half. "The whole year's growth may decline to 9.2 percent," he added.
"We should stick to our efforts to control prices," Shen Laiyun, a spokesman for China's National Bureau of Statistics, said at a press briefing on the data.
The inflation rate hit a three-year high of 6.4 percent in June, mainly pushed up by skyrocketing food prices. The central bank has hiked the reserve requirement ratio (RRR) for commercial banks six times and the benchmark interest rate three times this year to retrieve excessive market liquidity.
Wednesday's data also stirred anticipation that the central bank will further hike interest rates and the RRR for commercial banks within the year.
Higher interest rates will benefit the Chinese economy in the long run by guiding it towards a more sustainable path of development, according to Sheng.
Lu Zhengwei, chief economist of the Industrial Bank of Shanghai, said through his microblog that the central bank may raise interest rates one or two times within this year. He also expected that more time will be needed for consumer prices to fall.
