Different approaches are needed in dealing with price increases in grain and industrial raw materials to control inflation, said a senior researcher with a major government think-tank.

Zhang Junkuo, director of the State Council Development Research Center's Market Institute, warned that soaring energy and raw materials prices would lead to inflation, but that the grain price increase is basically innocuous.

China's price indices began to rev up at the end of last year. The key consumer price index, for instance, stood at 1.2 percent last year but gradually rose to 3 percent in March this year and prompted concerns about inflation.

"Grain price hikes were caused by short supply instead of being caused by surging demand," Zhang said in a report by his institute analyzing the demand and supply of major products, which was unveiled yesterday.

Grain prices should be left at the current level since this would benefit farmers and pose very little burden to urban residents, he said.

But particular attention should be paid to the rising price of energy and raw materials, which was caused by an excessively rapid growth in investment.

China's fixed asset investment surged by 27 percent last year and rocketed by 43 percent during the first quarter of the year.

The government should come up with more effective measures to restrict investment growth, he said.

(China Daily April 30, 2004)