China says cannot lower guard against inflation

China's efforts to curb price rises are working and could lead to lower inflation rate in February, but there is no room for complacency, the head of the country's state planning agency said on Sunday.
The government has repeatedly raised interest rates and banks' reserve requirements, plus tried to slow down soaring food and property prices in a bid to subdue inflation, which threatens to destabilise the world's second largest economy.
"The measures used to rein in price rises have achieved some results. We have conditions and are capable of keeping overall prices basically stable," said Zhang Ping, chairman of the National Development and Reform Commission.
"But we have also noted that upward pressures on prices remain big and we definitely cannot lower our guard," he told a news conference on the sidelines of a meeting of the National People's Congress in Beijing.
China's Premier Wen Jiabao said on Saturday inflation was affecting social stability, and taming it was a top priority for this year, while the government would aim for economic growth of about 8 percent.
The government is aiming for annual average inflation of 4 percent in 2011, higher than the 3.3 percent rise in consumer prices last year. Zhang said inflation in February was likely to ease in response to the official measures, repeating his earlier forecast.
In the latest Reuters survey, economists expected annual inflation to ease to 4.7 percent in the year to February from 4.9 percent in January.
To stabilise prices, the government will "appropriately" control money supply and bank lending, which have been rising at a fast clip over the past two years, Zhang said.
He said efforts to increase grain supplies, improve "market order" as well as provide subsidies to the poor have already had an impact on inflation.
Zhang also listed several measures aiming at curbing food costs, including lowering transportation costs and preventing price rigging and speculation in agricultural products.
China's grain reserves now account for 40 percent of annual consumption, higher than the normal international level of 17-18 percent, Zhang noted.
China wheat stocks stood at some 100 million tonnes, equivalent to the country's annual production, he added. "The ample stock of grains lays a solid foundation for the efforts to stabilise prices," he said.
On the global economy, Zhang sounded a cautious note, saying that the global financial crisis is not over yet and the global recovery remains tepid.