Zhang Xueying, a senior economist with the State Information Center, said the CPI, the key inflation gauge for Chinese policy-makers, was unlikely to rise much in spite of the disease outbreak.

There would be sufficient supplies of everyday goods such as rice, wheat flour, gauze masks and disinfectant because the country had a strong capacity to produce those articles, he said.

"The CPI for the whole year will rise about 1 percent compared with 2002," Zhang said.

Yesterday, the National Bureau of Statistics said the CPI rose 0.9 percent in March compared with the same month last year.

For the first three months, the CPI rose a year-on-year 0.5 percent.

The rise in the CPI or ease in deflationary pressure was partly due to the surging oil prices resulting from the US-led war on Iraq, the bureau said.

The prices for both gasoline and diesel soared 33.5 percent in March compared with a year ago.

The price hikes for fresh vegetables, tap water, electricity and some service items also contributed to the CPI rise, the bureau said.

The price of fresh vegetables rose a year-on-year 50.7 percent, while the price for tap water and liquefied petroleum gas rose 9.2 percent and 27.2 percent respectively.

Niu Li, another senior economist with the information center, said the rise in the CPI was also because of the central People's Bank of China's move to boost money supply in recent months.

The central bank has said it would boost both broad money supply (M2) and narrower money supply (M1) by 16 percent this year.

M2 was up 18.5 percent at the end of March from a year earlier and M1 was up 20.1 percent.

Wang Zhao, a research fellow at the Development Research Center under the State Council, said the rise in the CPI suggested that booming local and overseas demand helped balance overall supply and demand.

The government's efforts to cut over-production and increase the capacity for new products also contributed to the improvement, he said.

The rise in the CPI was of good news for China's economic development, because the decline in CPI was threatening corporate earnings, Wang said.

He said the CPI will continue to rise in the coming months.

The national economy will grow at a higher rate, Wang predicted. "This will play an active role in the CPI pick-up."

The strong growth in industrial production expected this year will create demand for energy and raw materials, which will also boost the CPI.

The consumer goods market, fuelled by increased residential income and demand, is also expected to grow more rapidly, he said.

(China Daily April 22, 2003)