China on Monday sought to reassure its people that inflation will remain in check,voicing confidence that ample grain supplies and excess capacity in industry will keep a lid on price pressures. Economists said the effort to manage inflation expectations was meant to reinforce an array of measures in recent days to curb actual inflation,including Fridays order to banks to hold more of their deposits in reserve instead of lending them out. We can understand the worries of residents about the relatively quick rise in food prices and other daily necessities, the National Development and Reform Commission,Chinas economic planning agency,said. But we also have the confidence to say that our country has the capacity and conditions to keep overall prices at a stable level, it said. Underlining its importance,the agencys statement was carried on the front page of the Peoples Daily,the mouthpiece of the ruling Communist Party. The government followed Fridays half-point increase in banks required reserves to 18.5 percent,a record high,by providing more details of the administrative measures it is drawing up to contain inflation. Road tolls for vehicles carrying fresh produce will be scrapped from December 1,and local authorities will have to ensure energy and transport prices for fertiliser producers are reduced,state media said. Regional governments will also have to ensure a steady supply of coal and oil. The administrative measures until now are mainly aimed at speeding up supplies. But theres a good chance that China will eventually resort to administrative price controls, said Wang Han,an economist in Shanghai with CEBM,an advisory service. Beijing announced an initial volley of steps last Wednesday,including handouts to people on low incomes,after inflation jumped to a 25-month high of 4.4 percent in the year to October. Qian Wang,an economist with JP Morgan,said the government had rolled out similar measures after a spike in prices in late 2007 and early 2008.
