China’s Bank of Communications (BoCom; 601328.SH, 3328.HK) said it expects the country’s inflation to peak at around 6% in mid-2011 and then taper off, Reuters reported. A report by the bank said that China’s uncomfortably high inflation was caused primarily by high food prices, rising production and labor costs, as well as excess bank liquidity. The bank also warned that in 2011 the country could face added pressure from importing high commodity prices and a weak US dollar. Overall, the bank forecast annual inflation for 2011 at 4.5% – exceeding 6% in some months – and foreign exchange reserves to rise to US$3.2 trillion from US$2.85 trillion at the end of 2010. Many analysts expect China’s central bank to announce further interest rate rises in the near future to contain rising inflation.
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