Government and Policy

Chinese Premier Wen chats online with Internet users

(Xinhua)
Updated: 2011-02-27 09:51

China to rein in soaring consumer prices

Chinese Premier Wen Jiabao told Internet users Sunday that he would not allow consumer prices to surge unchecked.

Wen made the remarks in an on-line chat with the public when answering questions concerning rising prices.

China had adequate grain reserves after seven consecutive years of increasing harvests and abundant foreign exchange reserves, which would help the country to fight inflation, Wen said.

Maintaining price stability had always been a priority of China's economic development as excessive increases in consumer prices would not only affect people's lives, but also disrupt social stability, he said.

China's consumer price index (CPI), a major gauge of inflation, rose 4.9 percent in January from a year earlier as food prices increased 10.3 percent due to rising demand and a drought in key grain-growing regions. The CPI rose by 4.6 percent in December and 5.1 percent in November, a 28-month high.

Soaring prices of food and other commodities have stoked price pressures that pose growing risks to the economy. Government departments have undertaken a slew of measures to keep prices in check, including programs to boost grain output, and drought relief assistance.

The People's Bank of China, the central bank, shifted to a prudent monetary policy from the previous moderately loose policy late last year. To draw off excess liquidity, the central bank has lifted the reserve requirement ratio (RRR) for commercial banks eight times since last year, and hiked the benchmark interest rates three times.

These policies had helped contain the rising trend of consumer prices, Wen said. "With these measures better implemented, we definitely can contain inflation."

The government has also announced measures targeting property speculation and curbing excessive price rises, including higher down payments, higher lending rates, purchase limits and increased housing supplies.

However, housing prices are still rising. According to the National Bureau of Statistics, 10 of the 70 surveyed cities reported double-digit increases in new home prices in January compared with a year earlier.

"We will use economic, legal and administrative methods if necessary to restrict speculation," Wen said, adding he was confident the measures would eventually reduce speculation.

Answering a question about former Railway Minister Liu Zhijun, who was dismissed from his post for alleged "severe violations of discipline," Wen said: "If the issue of price rises becomes connected with graft and corruption, it will be enough to spark public discontent or even create serious social problems."

He said the country was determined to crack down on corruption.