BEIJING - Despite positive results from recent efforts to curb prices, China still faces challenges in balancing inflationary pressure with stable growth, the country's top statistics official said on Monday in a published commentary.

"The basis for a smooth price level is not yet strong, and there are chances that prices may rebound," Ma Jiantang, head of the National Bureau of Statistics (NBS), wrote in an article in the latest issue of Qiushi Magazine.

The NBS said last week that the consumer price index (CPI), a main gauge of inflation, eased to 4.1 percent year-on-year in December, a 15-month low.

But Ma said that rising land, labor and resource costs were adding pressure to inflation in the long term, while the easing measures adopted by developed countries amid a slow global recovery might mean that imported liquidity would drive up prices.

"Therefore, policymakers need to maintain adequate vigilance against further price increases," he said.

The NBS is due to release key 2011 macroeconomic figures on Tuesday.

GDP growth in the first three quarters of last year stood at 9.4 percent, a number Ma described as a "hard-won achievement" for the world's second-largest economy amid the global downturn. But it is widely accepted among analysts that GDP growth fell below 9 percent in the fourth quarter and will further slow to about 8 percent in 2012.

According to Zhu Haibin, the chief economist in China with JPMorgan Chase Bank Co, inflationary pressure will give way to an economic slowdown as the country's top concern.

Food prices, a key driver of inflation, are likely to drop further, Zhu said.

The risk of imported inflation driven by commodity price hikes will also be lower, as global average inflation rate is forecast to decrease to 2.5 percent in mid-2012 from 4 percent in late 2011, he said.

Zhu forecast that GDP growth will drop to 8.2 percent, which might lead to moderate policy easing to support growth and restructuring.

Ma said that a "steady" economic performance will be challenged under the current stringent policy environment, and more flexibility should be included in the overall prudent policy stance.

The purchasing managers' index, an indicator of industrial activity, came in at 49 in November. A reading of 50 separates expansion from contraction.

Ma said that there was now room for the government to adjust its fiscal and monetary policies.

"The low level of the fiscal deficit and national debt, together with fast-growing fiscal revenue, provide the room and ability for powerful fiscal tools," he said.

Meanwhile, with prices retreating, there are more options for operations within an overall prudent monetary policy, he added.

"Economic growth is expected to rebound in the second half after a slowdown in the first six months this year," said Zhu.

China Daily

(China Daily 01/17/2012 page13)