By Qi Jingmei (China Daily)
Updated: 2007-07-27 11:06

CPI growth has been driven by increases in the prices of grain, poultry produces, meat and other foods.

Figures show food prices jumped 11.3 percent last month while non-food commodities climbed just 1 percent. The food price contributed 2.5 percentage points to the index's 3.2 percentage point rise between January and June. Other items included in the CPI calculation contributed the remaining 0.7 percentage points.

With the summer grains to be harvested soon and a bountiful autumn harvest in sight, the price of grain and agricultural produce should move to a more reasonable level later this year. The CPI will hopefully drop to its normal growth pace when the food price is no longer flying high.

The price soar did not affect producer goods though. The ex-factory price of industrial products saw a 2.8 percent rise in the first six months, almost identical to the rise over the same period last year. The cost of raw materials and fuel rose by 3.8 percent, 2.3 percentage points less than last year.

Of course, the price increase has gone beyond people's expectations, but the economy has also grown 11.5 percent, way above the 8 percent official forecast.

A buoyant economy usually is better at containing the influences of high price rises. It would only be worrisome if the economy grew quickly but prices remained dormant.

Hopefully, the economy will be up by 11 percent this year. A price rise between 3 and 5 percent is quite acceptable under such circumstances.

As mentioned above, the economic growth is propped up by strong demand in investment and exports. But different from in previous years, in 2007, China owes its growth more to mounting consumption.

Consumer confidence is enhanced by the continuous economic boom, with spending on housing and medical care on the increase and the rural market is especially active since the turn of the year.

The enhanced role of consumption in the economy indicates it is growing in a more sustainable manner, which has always been the policy goal.

Another heartening signal from the economic indicators is that people are enjoying a larger slice of the economic development cake. The incomes of both urban and rural citizens has risen rapidly in recent years.

The average disposable income of urban residents was 7,052 yuan in the first half, up 14.2 percent year on year and 4 percentage points more than the growth achieved in the same period last year. Rural citizens had an average cash income of 2,111 yuan, up 13.3 percent year on year and 1.4 percentage points more than last year.

The increases are a direct result of government's efforts to improve living standards for workers and pensioners by reforming the income distribution scheme and giving higher priority to public welfare.

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