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Economists: Inflation not likely to occur in China in 2009

(Xinhua)
Updated: 2009-06-17 15:26

Senior Chinese economists have moved to quell fears that stimulus spending could cause a spike in inflation, warning instead of the risks of deflation.

Ou Minggang, director of the International Finance Research Center of China Foreign Affairs University, said Wednesday that the fears were predictable given the surge in credit.

Concerns over possible inflation have shadowed the growth in bank credit, which continued to expand in May, with new loans reaching 664.5 billion yuan ($97.29 billion), according to the People's Bank of China (PBOC), the central bank, on June 12.

Related readings:  Inflation risk still high despite price index fall  Analyst: Inflation expectations benefit stocks  China's CPI fall in May for 4th month  CPI and PPI fall, but deflation threat eases

Ou cited the second-quarter banker confidence index results, released by the central bank on June 12, to show some bankers worries over the surging loans and their confidence in economic growth this year.

About 49 percent of Chinese bankers thought the loans policy was a bit too "relaxed", an increase of 3.9 percentage points from the first quarter, while confidence in macro-economic growth prediction reached 39.1 percent, up 5 percentage points.

Ou's comments to Xinhua followed the prediction by Yao Jingyuan, chief economist with the National Bureau of Statistics (NBS), that inflation would be curbed by overcapacity and unemployment.

"Deflation, instead of inflation, should be the major concern," Yao told an international risks management and insurance forum in Shenzhen Tuesday.

"There is no need to be too worried about inflation, as commodities prices will remain low for the whole year," said Yao.

Maintaining economic growth was the government's top priority, and stimulus measures can also be used to combat deflation, said Yao.

Overall China's economy remained good and would maintain steady growth despite the global economic downturn.

"China is in the middle stage of industrialization. Foreseeable factors, including industrial growth and increasing urbanization, will bolster China's economy to achieve growth," said Yao.