China Expects 7.3% Rise in Inflation Rate : Economy: Top leaders have called for a managed slowdown to guard against overheating and a return to the double-digit figures of the ‘80s.

China’s official inflation indicator, the retail prices index, will rise 7.3% in the first quarter of this year compared to the same period last year, according to official predictions cited in China Securities newspaper.

While top Chinese leaders at the end of last year called for a managed economic slowdown to guard against economic overheating, they said the retail price index last year rose within its 6% growth target at only 5.4%.

The State Information Center, part of the government’s State Planning Commission, said price rises could possibly be kept under 10% this year and that this would be “tolerable,” the state-run newspaper reported.

China is ultra-sensitive to price rises since its last bout of double-digit growth ended in 1988, when 18% inflation sparked panic buying and bank runs, prompting a three-year government clampdown on growth.

Last year, a 37.6% increase in capital construction and a 20% increase in new bank loans drove economic growth up 12.8% and industrial output up 20.8%. Chinese leaders called for fine tuning to control economic growth within 9% this year and growth in bank loans within 17.6%.

The center said there were signs this policy was succeeding, but the controls may be too late to stop consumer rushes to buy gold and household appliances to hedge against inflation, which the Chinese press started reporting last month.

Reflecting this, retail sales are expected to increase 17.4% in the first quarter, compared with 15.7% for last year, the center predicted.