China must stay alert on inflation in 2012

Expectations of a relaxation of macroeconomic policies are "unwise" as none of the conditions contributing to imported inflation have been tackled this year, said Chen Huai, former director of the policy research office of the Ministry of Housing and Urban-Rural Development.

Curbing inflation remains a priority this year as the United States maintains its policy-easing stance, injecting liquidity while pushing up the prices of dollar-denominated global commodities, Chen said.

China's inflation, mainly driven by surging food prices, is also easily influenced by global market fluctuations. When the global oil price surpasses $60 a barrel, replacements such as corn and soybeans are sought, which further pushes up food prices, Chen said.

China is currently at a stage where economic growth and the improvement of people's livelihoods require increased consumption of resources.

Chen said that, as there are fewer than expected natural resources buried under vast areas in the west of the nation, China has no other choice but to rely on imported resources, as reflected by the construction of many harbors such as Yangshan Port in Shanghai.

This, in turn, makes the country sensitive to global commodity prices.

Therefore, China's monetary policy, even with possible cuts in bank reserves, will remain tight this year, Chen said.

But he remained confident about China's ability to cope with the situation.

Although many people compare China to Japan in the 1990s before it entered a long-term economic recession, Chen said China is more like its neighbor in the 1970s, with widespread construction of housing and high-speed railways, and an appreciating currency.

To cope with the challenges, Japan transformed itself into a powerful economy with advanced technologies, and "China will only do better", Chen said.

Wei Tian