China is unlikely to experiencedeflation or long-term inflation and in the long run, price will risemoderately, said Li Yang, director of the Financial Institute of Chinese Academy of Social Sciences.

    Li holds that rising salary cost and resource pricing reformsrepresent the major factors behind the current structural price hikes.

    However, the long-term pressure from pay rise will be offset bysurplus labor force, which will continue in the years to come.

    High savings rate of Chinese residents also shields China frominflationary pressure. China's deposits outstanding hit 17 trillionyuan by year-end of 2007, with the savings rate approaching 50 percent.

    In the short term, pork price has dipped month by month this year.

    Given the cyclic nature and relatively quick adjustment of theproduction of pork and farm produce, combined with proper policyincentives, the high level of pork price may be reversed.

    As for the factors for imported inflation, Li noted that thepricing power for oil now rests with the financial sector, whichexerts leveraging effect on or even distorts the real economy. Ingeneral, oil supply still exceeds demand, which may drive oil pricedown in the second half of this year or the first half of next year.

    In addition, it is expected that the US dollar may rebound afterhitting the bottom. If oil price falls and the US dollar strengthens,price hike pressure of other commodities will be eased.

    Li also pointed out the real pressure on inflation are spiralingsalary and consumer price, expansion of money supply in response tofiscal deficits and excessive demand. However, these factors do notexist in China.