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Portfolio > Economy & Markets

China Struggling to Curb Inflation: Wen

By Marlene Y. Satter

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China's goal of keeping inflation under 4% may be tough to reach even as it expects its economy to continue to grow, althopugh at a slower rate, Premier Wen Jiabao was quoted as saying by Hong Kong media on Monday. The remarks mark a shift in tone from as recently as Friday.

In a Reuters report, Wen said, "China's financial situation will still be among the best in the world this year, with economic growth kept above 8-9%, and CPI controlled under 5%."

However, on Friday he sounded considerably more optimistic, insisting that inflation was under firm control and that it would fall back. In an opinion piece in the Financial Times, he said: "There is concern as to whether China can rein in inflation and sustain its rapid development. My answer is an emphatic yes." He also said China was "fully capable" of keeping its economy bubbling.

His change in tone from Friday to Monday was not news to economists, many of whom believe the country will miss that 4% target thanks to an inflation rate that has remained steadily above it for the year so far. They expect that it may peak in June or July at 6%. In May it reached a 34-month high of 5.5%.

A slowdown in the Chinese economy could mean trouble for growth elsewhere in the world, since the U.S. economy is faltering and Europe is preoccupied with debt worries. China's economy grew 10.3% in 2010, but in the first quarter of 2011 it fell back a bit to 9.7%. The focus, however, is on inflation, with Vice Premier Li Keqiang saying on Saturday that fighting inflation was still China's top priority.

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