China should not ignore deflation while preventing the risk of inflation in 2004 as the current rising Consumer Price Index (CPI) is unsustainable, Yao Jingyuan, chief economist with the National Bureau of Statistics, said Saturday.

Supply still exceeds demand overall in China's market, in which, despite a rising food price, the price of industrial products declines and the price of service remains stable, Yao said when addressing a forum on China's balanced development.

The grain price rose in the fourth quarter of 2003 mainly because of a grain shortage in the market, Yao said. China's grain production has been decreasing since 1998 due to a price drop then, and the situation became more serious last year due to floods and droughts.

But the price rise of grain would not last long, for both the government and the market price encourage the farmers to plant more grain this year, he said.

Restrained by consumption, the price increase of raw materials like steel would not transmit to end products smoothly either, he said, taking the declining price of cars as an example.

Yao also mentioned the factors restricting inflation in China in 2004, including the shift of China's economic development mode from speed-oriented to a more balanced one, the slow growth of the residents' income and the large unemployed population, the increasingly free competition in China's market, and the general declining trend of the world CPI.

(Xinhua News Agency March 20, 2004)