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China may miss 4% inflation target

China might miss its target of keeping inflation below 4 percent this year, an official said on Sept 14.
The 4 percent figure was a "predictive target" instead of a "directive" one, Zhang Xiaoqiang, vice-minister of the National Development and Reform Commission, told a small group of reporters in Dalian.
Judging from the trend, it seems that the target will be missed, he said on the sidelines of the World Economic Forum in Dalian.
However, China will keep inflation management as its top priority, Zhang said.
The consumer price index (CPI), a main gauge of inflation, eased to 6.2 percent in August, from a three-year high of 6.5 percent in July, according to the National Bureau of Statistics.
Zhang said China''s grain output is expected to grow for an eighth consecutive year in 2011 and reach a record of 560 million tons, which will ease inflationary pressure. Food accounts for about one-third of the CPI.
Other favorable conditions, including China''s proactive fiscal policy and prudent monetary policy, will ease the pressure of excess liquidity, but China still faces great imported inflation and rising labor, land and environment costs as the nation seeks to upgrade its economic structure.
Fan Shenggen, director of the Washington-based International Food Policy Research Institute, said external inflation does exist, but China should build a more constructive mechanism to manage grain and pork prices.
"China needs a more mature market-driven stabilization mechanism," Fan said.
Zhang also said China is revising its guidelines for foreign investors.
The latest version of the Catalog of Industries for Guiding Foreign Investment is expected to be released in the coming months, Zhang said.
The document, which lists favorable industries and investment limitations for foreign investors, was last revised in 2007.
"So far, it is under discussion. We have received various views and suggestions from different sectors ... and we''d like to adopt reasonable proposals," Zhang said.
The government released a draft version of the catalog in April on its official website for public comment.
Without providing details about possible changes, Zhang said the principles would be to promote openness as well as to optimize the structure and enhance the quality of foreign investment.
Also, a detailed plan for the strategic emerging industries is likely to be submitted to the State Council for a decision this month, Zhang said.
The plan will include a special development fund to encourage research and development and promote pilot programs, he said, without giving a specific figure.
Foreign direct investment in China surged 18.6 percent year-on-year in the first seven months to $69.2 billion, although investment from the United States declined 19.2 percent to $1.94 billion, according to the Ministry of Commerce.
Gordon Orr, Asia chairman of McKinsey & Co, said the decline was not a cause for worry.
"Multinational companies are incrementally increasing investment in other countries such as India, Indonesia and Brazil. It doesn''t mean China has become less attractive, just because investors have to balance investment around the world," he said.
"China still tends to be the hottest destination," Orr said.
Michitaka Nakatomi, principal trade negotiator of Japan''s Ministry of Economy, Trade and Industry, said policies on strategic emerging industries will encourage Japanese to invest more, but it also depends on the investment environment as companies are looking at other markets as well.

(Source from China Daily)