In the latest news from the People's Bank of China released Sept. 26, the economy is expected to grow 9.2% this year and 8.7 % in the first half next year. This compares to a 9.5% growth rate in 2004 and a 9.5% in the first half of this year.
"We must closely watch the impact of surging oil prices on the international market but also prevent a further fall in overall prices in the country," the research report said, referring to the threat of deflation.
CPI growth has declined since March, slipping to a 1.3% year-on-year increase in August. The continuous fall is mainly due to a sharp slowdown in rises in food prices, weakening consumer demand and overcapacity as government efforts to cool the economy start to take effect, the report said. Researchers from the central bank attributed the expected decline in CPI to a slight fall in grain prices, adding that ongoing reforms to China's foreign exchange mechanism will also help keep prices stable.
Economists have warned that China's rapid economic growth will possibly slow down or even lead to deflation, whereby prices fall steadily, in the coming years.
Copyright Agence France-Presse, 2005
