China Inflation Grew in April, But Strong Growth Continues

By: EW News Desk Team   Date: 20 May 2010

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20 May 2010

China's inflation accelerated in April, triggering fears of overheating and a possible credit clampdown by Beijing that might slow the country's economic recovery.

April consumer prices rose 2.8 percent from a year earlier, below Beijing's full-year target of 3 percent but up 0.4 percentage points from March, the National Bureau of Statistics said.

China's inflation accelerated in April, triggering fears of overheating and a possible credit clampdown by Beijing that might slow the country's economic recovery.

April consumer prices rose 2.8 percent from a year earlier, below Beijing's full-year target of 3 percent but up 0.4 percentage points from March, the National Bureau of Statistics said.

Food prices jumped 5.9 percent, up from March's 5.2 percent rate.

''Growth in the consumer price index is still mild compared with our economic recovery and inflation in other countries,'' said a bureau spokesman, Sheng Laiyun.

''But we are facing big inflation pressures in the short term.''

Foreign companies and investors are watching Chinese inflation

because any moves to cool prices might slow stimulus-fueled economic growth that surged to 11.9 percent in the first quarter.

That could hurt the global recovery if it weakens demand for foreign iron ore and other imports.

Economists said inflation is still relatively low and Beijing was unlikely to react with an immediate rate hike at a time when the global outlook still is uncertain amid the European debt crisis.

''Overall, we don't see this as threatening yet for the economy,'' said Standard Chartered economist Jinny Yan.

''What they will do is observe external markets for a while longer before deciding what to do''...

''Investors worry there is a chance of the economy overheating, and that might trigger more government policy tightening,''

said Huang Xiangbin, an analyst for Cinda Securities in Beijing.

The government worries about a surge in housing and other asset prices

and is trying to use lending curbs to prevent a dangerous bubble while avoiding an across-the-board rate hike that might slow growth.

Housing prices in 70 Chinese cities jumped 12.8 percent in April despite the controls,

the statistics bureau said, in this AP article published in the New York Times.

Bank lending rose to 774 billion yuan ($113 billion), up from March's 510.7 billion yuan ($75 billion), the central bank announced.

Wholesale prices climbed 6.8 percent in April from a year earlier, a 0.9 percent increase over March's rise.

That can lead to a rise in consumer prices down the line as retailers pass on higher costs.

Inflation was driven by cold weather that hurt the spring harvest and high prices for fuel and imported commodities, said Sheng, the statistics bureau spokesman.

He said the biggest rises in April food costs were 14.9 percent for vegetables and 16.4 percent for fruit.

Other data showed China's economic recovery still on track.

April retail sales rose 18.5 percent from a year earlier, up 0.5 percent from March's growth rate,

while industrial output increased by 18.8 percent.

Investment in factories and other fixed assets rose 26.1 percent in the January-to-April period over a year earlier.

''High growth and low inflation in the first half of the year looks set to segue rapidly into lower growth and higher inflation in the second half,''

said Tom Orlik, an analyst in Beijing for Stone & McCarthy Research Associates, in a report.

''But there is little in today's data release to force a change in the government's policy agenda.''

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