MercoPress. South Atlantic News Agency

Chinese savers consider current inflation as “unacceptable”

Premier Wen Jiabao admits that inflation, corruption and income inequality are major problems

More than one in two Chinese savers regard the current inflation rate as unacceptable, according to a central bank survey that is likely to fan official concern about deteriorating inflation expectations.

Consumer prices rose 2.7% in the year to February, up from 1.5% in January and very close to the government's 3% target for 2010.

Although still modest, inflation now exceeds the 2.25% rate on one-year bank deposits -- strengthening the case for the People's Bank of China (PBOC) to raise interest rates, some economists say.

Fifty-one percent of depositors questioned -- a record high since the start of the poll in 1999 -- said they were dissatisfied with the current rate of inflation, compared with 46.8% in the previous quarterly poll.

The survey's index of future price expectations fell to 65.6 from 73.4, but after accounting for seasonal fluctuations the PBOC said people expected inflation to keep rising next quarter.

Premier Wen Jiabao told a news conference on Sunday that inflation, along with income inequality and corruption, could upset social stability and even undermine the power of the state if it got out of hand.

More than 70% of those surveyed said current property prices were unacceptably high, the PBOC, which published the survey on its website, www.pbc.gov.cn, said.

Despite the negative real deposit rate, the proportion of families who said they intended to save money rose to 43.6% from 42% last quarter, while a slightly smaller share said they would spend more, according to the central bank.