Beijing, Sept 4 - Recent price rises for agricultural goods in China will not lead to inflation this year, despite the likely impact of a drought on the grain harvest, a senior official said on Friday.
China has seen several weeks of mild increases in pork and egg prices, triggering concern that history will repeat itself this year and rising costs of food staples will lead a rebound in inflation, just like a spike in pork prices did in 2007.
Chen Xiwen, director of the Office of the Central Rural Work Leading Group, played down the price rises but warned that authorities needed to watch consumers' price expectations.
He told a news conference that recent rises would encourage supply, which should then drive down prices later this year.
"China will not see big price fluctuations in agricultural products, let alone inflation led by agricultural price rises," he said, citing improving agricultural development and sufficient state reserves of grain and corn.
He noted that heavy drought this year in China's main corn and rice producing regions increased uncertainty about the autumn harvest, but declined to specify whether grain output would decline this year.
When asked about the outlook for pork prices, he said: "It depends partly on autumn grain harvest, but more on people's expectations."
Chen added that slowing loan growth in the second half was justified and would not hurt economic growth.
Chinese banks extended about 320 billion yuan ($47 billion) in new loans in August, the slowest monthly total this year, sources told Reuters this week.
"A modest fine-tuning does not mean a change in China's appropriately loose monetary policy," he said, adding that the slowdown was partly because loans granted in the first half have yet to be used.