By Xin Zhiming (China Daily)
Updated: 2007-11-09 07:29

China's economic growth is expected to exceed 11 percent for 2007 and growth in the consumer price index (CPI), the main measure for inflation, will be around 4.5 percent year-on-year, the central bank said Thursday.

Related readings:  China 2007 CPI growth seen at more than 3% - NDRC  CPI up 4.1% in first nine months  NDRC expert: 2007 CPI a remarkable 4.3%  Central bank: CPI to up 4.6% this year

China's trade surpluses will remain large but their growth rate will gradually ease, the People's Bank of China said in its third-quarter monetary policy report.

"The inflationary pressure on the whole remains large and attention still needs to be paid to inflationary risks," the central bank said.

This indicates further tightening measures, such as interest rate hike, may follow, analysts said, although they were divided on the timing.

"The central bank will probably raise the interest rate, given its claim in the report and the expected strong economic indicators for October," said Chen Xingdong, chief economist of BNP Paribas Peregrine Securities. "It will meet with little opposition."

The central bank has raised the rate five times this year.

"There is room only for once more by the year-end," he said.

The market has widely expected CPI growth to rebound after easing to 6.2 percent in September from 6.5 percent in August. Chen said it may reach 6.7 percent in October.

Goldman Sachs (Asia) released a report Thursday that pointed to an expected 6.8 percent growth in CPI.

Liang Hong and Song Yu, Goldman Sachs economists, also said in the report that two more interest rate hikes are possible by the end of this year.

They raised their full-year 2007 CPI forecast to 4.8 percent from 4.5 percent and to 4.5 percent for 2008 from the previous 4 percent.

"One reason for the strong CPI growth is that the base figure of last October is low," Chen said.

Grain and food prices have rebounded and energy prices continue to rise, which have both contributed to CPI growth.

China raised prices of major oil products from November 1, driven by the continually rising oil prices in the global markets.

The central bank said another factor for inflation is rising salaries, which will push up overall price levels.

Economists expect China's economy will continue to be strong. Fixed-assets investment, money supply and liquidity, apart from trade surplus, will all remain at a high level.

The central bank said previous tightening measures need time to materialize. Those factors, coupled with high prices, will add to pressure on policymakers to further tighten the economy.