Recently, China’s National Bureau of Statistics has released the CPI in July 2011, up by6.451% compared to that in June, and 0.463% year-on-year. The major factors ofthe increase of CPI is food price, according to Li Zhiping, co-coordinator of Macro economy research team of Sinolink Securities.

The increase of consumer price is mainly driven by food. The price of meat, egg sand sea food has grown continuous and contributes a significant proportion to the total, even though the rise range shrank compared to that in June.Meanwhile, the consumer price of non-food products has risen by 0.1%, which isexpected and conform to regular seasonal pattern.

Accordingto Li, CPI will perform a downward trend in the next few months. China will continue to struggle with high inflation rate and maintain a negative interestrate in the short term. He added, the CPI is expected to come close to 6.1% in August. Citibank China predicts the same trend. Based on a research published by Citibank,China’s CPI has reached a new high within three years, rising from 6.4% in Juneto 6.5% in July.

Although the inflation still sprawls the country, the consumerprice has already reached the highest point and will not continue to growth such as Winter Coats For Womenhas gown more than 30%. The upsurge of food price has exerted a great impact on CPI. In particular, in July, pork price was up by 56.7%. Fortunately, the number has become steady inthe middle of July and decreased a bit, which will relieve the strain inAugust. Besides, the bank claims that China is expecting a harvest of magnitudethis year, which will certainly work on inflation.

Monetarypolicy is also taking effect in July, which is indicated by the decrease ofnon-food product price. Moreover, the drop international bulk commodities pricewill also relieve the impact of inflation. According to Citibank, it ispredictable that the price of product oil will decline soon.

As to policy, the bank indicated that deflationary policy will not be launched,due to the downgrade of US creditrating.

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