"In June, the SARS outbreak was effectively controlled, its negative impact had ebbed, and the consumption demand began to warm up ... the overall commodity price level returned to stable figures," the central bank said in a statement.

Qi Jingmei, a senior economist with the State Information Center, said the positive changes suggest the country's economy has turned for the better.

"The deflationary pressure also continued to ease," she said.

Qi said the price measurement by the central bank, although different from the consumer price index (CPI) - a key inflation gauge compiled by the National Bureau of Statistics, moves in the same direction of the CPI and reflects the same economic issues.

"The price rise was partly due to the higher oil prices on the international market," Qi said.

Oil prices rose 17.4 percent in June compared with the same month in 2002.

Niu Li, another senior economist with the center, said the central bank's move to boost money supplies in the past several months also contributed to the price rise.

The central bank has said it would boost both broad money supplies (M2) and narrower money supplies (M1) by 16 percent this year.

M2 was up 20.8 percent at the end of June from a year earlier, and M1 was up 20.2 percent.

Wang Zhao, a researcher at the Development Research Center under the State Council, said the price rise suggested that booming local and overseas demands helped balance overall supply and demand.

"The price rise was a piece of good news for China's economic development, because the price decline was threatening corporate earnings," Wang said.

Qi said the commodity price will continue to rise in the coming months. "The national economy will continue to grow at a higher rate this year, which will play an active role in the price rise," she said.

The strong growth of industrial production will also continue, because of the country's fast growing economy, the improvement of industrial companies' economic efficiency and excellent export prospects.

"This will produce a significant demand for energy and raw materials, which are beneficial for the price rise," she said.

But the three experts agreed that the commodity price could not grow by a large margin.

"No China-made products fall short of supply," Niu said.

The progress made in science and ongoing system reforms also dragged down prices.

(China Daily July 15, 2003)