Chinese inflation to ease in second half of 2011: government

BEIJING (Reuters) - China's inflation will fall slightly in the second half of 2011, but it will be tough to keep the full-year rise in consumer prices below the government's 4 percent ceiling, an official said in remarks reported on Sunday.

Xu Lianzhong, a director at the National Development and Reform Commission, said China still faced serious inflationary pressure as rising production costs were pushing up the prices of food, goods and services, according to the Xinhua news agency.

Xu said consumer prices, which were up 5.4 percent in the year to March, would rise about 5 percent over the first half of the year -- the same pace as in the first quarter.

He projected a year-on-year rise of between 4.9 percent and 5.1 percent in the second quarter.

"The country has raised minimum grain purchase prices this year, which will, in turn, keep the prices of meat, eggs and vegetables at high levels," Xu, who works in the planning agency's analysis and forecasting division, was quoted as saying.

But he told a forum in Hangzhou that inflation was unlikely to rise beyond 5 percent.

The government has said it is determined to cap inflation. To that end, the central bank has raised banks' required reserves four times and interest rates twice since the start of the year.

Vegetable prices could provide some relief in the short term, having dropped 9.8 percent on average last week and 16.2 percent in the past three weeks, according to the Ministry of Commerce.

Food makes up 30 percent of China's consumer price index.

Prices have slumped because vegetables in northern China have ripened early due to warm weather, leading to a glut. One heavily indebted farmer recently committed suicide in the eastern province of Shandong after the price of cabbage fell to one fifth of his production costs, Xinhua said.

(Reporting by Alan Wheatley; Editing by David Cowell)