China's Inflation to Head Higher Despite Rate Hike: Expert

Inflation in China is expected to head higher due to a recent effort by companies to raise wages in the second quarter of the year, said Jing Ulrich, Managing Director & Chairman of China Equities & Commodities at JPMorgan.

Data from the National Bureau of Statistics showed the consumer price index rose 3.6 percentin September, in line with expectations.

The Chinese central bank's rate hike on Tuesday is basically a measure to pre-empt inflation and try to dampen inflation expectations going forward, Ulrich told CNBC on Thursday.

"One rate hike alone is not enough to dampen future inflation," Ulrich said.

However, with an appreciating yuan and arecent hike in the country's reserve requirement ratio on the larger banks, Ulrich thought this was a good recipe for stemming a rise in inflation.

Nanjing street shopping district.
Grant Faint | The Image Bank | Getty Images
Nanjing street shopping district.

"A combination of monetary policy, administrative measures and also the exchange rate, I think, will be successful in dampening inflation going forward," she said.

"I think we may see another rate hike some time in 2011 - at the beginning of the year. But for the rest of this year, I don't think they will raise rates again."

China also released its third quarter gross domestic product data, which showed the economic growth slowing to 9.6 percent from 10.3 percent the quarter before. But the figure was better than the 9.5 percent growth analysts were expecting.

Industrial output rose 13.3 percent in September from a year earlier, the statistics bureau said, while retail sales rose 18.8 percent.

Urban fixed asset investment gained 24.5 percent in the first nine months of 2010 from a year earlier. That compared with economists’ 24.6 percent median estimate.