China's inflation could hit five percent this year due to soaring commodity prices and rising wages, a central bank advisor has warned, according to state media on Thursday.
But Li Daokui was quoted by the China Daily as saying inflation was likely to stay below that level if agricultural production was "reasonably healthy and international commodity prices don't rise too high".
Inflation remained stubbornly high in January, with the consumer price index rising 4.9 percent year-on-year, despite a series of measures taken to dampen price rises, which have been driven by soaring food costs.
The figure was 4.6 percent in December after a more than two year high of 5.1 percent in November.
Beijing, ever fearful of inflation's historic potential to spark social unrest, has made curbing price rises a top priority and aims to contain the increases at around four percent this year.
"The main cause of inflation is cost increases, that is, rising commodity prices — the cost of imported raw materials — and accelerating wage growth," Li said.
He also said surging oil prices had weighed on the world's second-largest economy, which imports as much as 55 percent of the oil it consumes.
"As the turmoil in North Africa and the Middle East leads to higher and higher crude oil prices, certainly it's a major concern for China's economy," Li said.
The "worst scenario" for 2011 would be if oil prices soared to $130 a barrel, he said, adding that the government and Chinese companies were working on plans to hedge against further increases in international commodity prices.
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