China's fast expanding loans won't lead to inflation, at least this year, according to the chief economist at the National Bureau of Statistics.

"Two elements will contain the risk of inflation this year. One is the excessive production capacity which keeps the consumer prices at low levels. The other is the still-tough employment situation," Yao Jingyuan told the China Securities Journal.

He said China was not likely to see inflation this year and the major concern at the moment remained deflation.

Last year, China's urban registered unemployment rate jumped for the first time in five years to 4.2 percent, according to the Ministry of Human Resources and Social Security.

China's Consumer Price Index, the main gauge of inflation, fell 1.4 percent from a year in May, the fourth consecutive monthly decline.

The Producer Price Index, the factory-gate inflation yardstick, dropped 7.2 percent last month on an annual basis, a record low following drops of 6.6 in April and 6 percent in March.

Despite the falling CPI and PPI, some institutions and analysts issued early warnings for inflation.

Fan Jianping, chief economist at the State Information Center, a research unit under the National Development and Reform Commission, said earlier this month that the risk of inflation had increased "significantly" in recent months because of the rising price of commodities in the global market and the fast expanding loans at home.

China's new loans grew in May to 664.5 billion yuan (US$97.3 billion), extending total bank lending in the first five months to 5.84 trillion yuan, surpassing the country's goal of 5 trillion for the whole year.

(Shanghai Daily June 18, 2009)