Chinese Premier Wen Jiabao admitted on Wednesday the country is facing "increasing inflationary pressures" and the task of holding down inflation is "difficult."
"The current price hikes and increasing inflationary pressures are the biggest concern of the people," Wen said in his report to the First Session of the 11th National People's Congress opening here on Wednesday.
Last year, China's consumer price index (CPI), a barometer of inflation, rose by 4.8 percent year-on-year, the highest since 1997 and well above the government target of 3 percent.
In January, the monthly CPI rose 7.1 percent, a result of price increases during the Chinese Lunar New Year and the severest winter weather attacking central, southern and eastern China in five decades.
Price hikes are among the "topics of most concern" that Chinese netizens hope this year's parliamentary session will address, along with housing, medicare reform and social security, according to an online survey by several leading Chinese websites including xinhuanet.com and sina.com.
Addressing the opening meeting of the parliament, Wen said the price increases had a great impact on the people's lives, particularly on the lives of the low-income population.
Pork prices, which had been considered as the major factor driving up the CPI in the second half of 2007, surged 58.8 percent in January, the National Bureau of Statistics said.
"Because factors driving prices up are still at work, upward pressure on prices will remain great this year," he said. "In addition, prices of the means of production have continued to rise and real estate prices have risen steeply, making the task of holding down inflation difficult."
He said the country would maintain this year's CPI rise around 4.8 percent.
Prof. Wei Jie of Beijing's Qinghua University takes the high CPI rise as a warning that the country must shift its mode of economic development within two to three years.
"We must shift from the old practice of relying on investment and exports for economic growth, and further expand domestic demand and consumption instead," said Wei, a professor of business administration.
In the transformation process, the government should take administrative measures to prevent excessive price hikes and properly settle consequent social issues and various problems concerning the livelihood of the people, Wei said.
"Government interim intervention and subsidies for those in poverty, for example, have helped check price hikes of consumer goods and ease the burden on the disadvantaged group," he said in an exclusive interview with Xinhua.
Wei said the country should maintain 6 percent to 8 percent of GDP growth to avoid overheating.
Last year, however, China's GDP grew 11.4 percent year-on-year to 24.6619 trillion yuan (3.43 trillion U.S. dollars), with higher risks of spiraling inflation and economic overheating.
China's annual CPI rise averaged 2.1 percent between 2003 and 2006.
The year-on-year CPI rise exceeded 6 percent for the first time in August 2007 and then for five consecutive months.
(Xinhua News Agency March 5, 2008)