Mainland inflation to have a spillover effect
Inflation on the mainland is expected to continue to rise at least through the second quarter and is likely to affect Hong Kong via higher import prices, economists said.
The mainland’s consumer price index (CPI) – a main gauge of inflation – rose to a 32-month high to stand at 5.4 percent in March from a year ago, the National Bureau of Statistics (NBS) said Friday.
And inflation on the mainland will affect Hong Kong consumer prices as increased costs for agricultural products and daily necessities will also drive up those in the city, Sheng Laiyun, spokesman for the NBS, said at a press conference in Beijing Friday.
According to a survey released by the city’s Consumer Council on the same day, the 200 most popularly sold products in Hong Kong’s supermarkets rose by an average price of 1.7 percent in 2010.
Forty-five percent of the surveyed items have recorded price increases, among which the price of eggs surged 14.6 percent and milk powder and infant formula also increased at a double-digit pace.
This compares with an 11 percent hike in food prices in March year-on-year on the mainland.
Paul Tang, chief economist at Bank of East Asia, told China Daily that fast-rising food prices on the mainland will inevitably have an effect on Hong Kong as the city imports much of its food from there.
“Counting in the city’s residential rent which is growing even faster in 2011 than last year, we forecast Hong Kong’s inflation growth to parallel that of the mainland, both being set to grow by 4.7 percent for the whole year of 2011,” said Tang.
“Excessive credit, food and oil price surges and the Japan quake have all complicated the inflation and growth pictures on the mainland. Combating high inflation growth is the main theme for the central government this year,” said Qu Hongbin, chief economist of Asian economic research at HSBC, at a press briefing in Hong Kong Friday.
Since October, the central government has introduced a basket of policy measures including supply-side measures, quantitative tightening, rate hikes and some specific property cooling rules, in a bid to fight inflation.
Though Qu said government policies are now working, particularly in regards to overheating credit and economic growth, he said it is still too early to ease tightening measures as inflation is still increasing.
Qu forecast one more 25 basis point (bps) interest rate hike and two more 50 bps reserve requirement ratio hikes in the second quarter to anchor inflation expectations, and he expects CPI to start tailing off in the second half of this year after inflation growth hits around 6 percent in June.
“Given the escalating inflationary pressure and maintained strength of growth momentum, monetary policy is set to tighten further,” Liao Qun, chief economist of China banking for Citic Bank International, wrote in an email report Friday. He agrees that one more hike in interest rates and two more rises in reserve requirement ratio are expected in the current quarter, with one of the latter likely to take place in the near future.
China Daily
(HK Edition 04/16/2011 page2)
http://www.chinadaily.com.cn/hkedition/2011-04/16/content_12336323.htm