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OECD warns of inflation risk in China

PARIS – CHINA’S economy faces serious inflation risks which, if unchecked, could fuel yet more speculation in stocks and property, the Organisation of Economic Cooperation and Development (OECD) said yesterday.

Economic growth is likely to reach 10.7 per cent next year and 10.1 per cent in 2009, the OECD said in its twice-yearly Economic Outlook report, meaning China would experience seven consecutive years of doubledigit expansion.

‘The economy has moved to a situation of excess demand with increasing pressure on monetary aggregates,’ it said.

‘If this situation persists and global food prices do not moderate as expected, there is a risk of inflation becoming entrenched.’

The OECD’s warning coincides with a markedly growing emphasis on inflation among policymakers in Beijing.

Inflation in China hit a 10-year high of 6.5 per cent in August and again in October, while for the full year it is likely to be 4.4 per cent.

‘Speculative activity has already increased, both in the equities market and in real estate markets in southern coastal areas,’ the OECD said.

 

Source: AGENCE FRANCE-PRESSE (The Straits Times 7 Dec 07)

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