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Inflation accelerating in China

Updated: 05 07 , 2013 18:51
People's Daily Online Small  Medium  Large Email Print

Inflation accelerated in April, triggering a sell-off in Chinese stocks Tuesday on fears of overheating and more credit tightening by Beijing that might slow its economic growth.

April consumer price index, a gauge of inflation, rose 2.8 percent from a year earlier, 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," 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 by Beijing might slow stimulus-fueled economic growth that surged to 11.9 percent in the first three months. That could hurt the global recovery if it weakens China?s demand for foreign iron ore and other imports.

The data of rising inflationary pressure spooked investors and China's main stock index tumbled 1.9 percent Tuesday to close at its lowest level in 11 months.

Chinese investors have been jittery over the past two weeks about the potential for the government to tighten access to credit following repeated pledges by authorities to cool a surge in housing prices.

In addition, speculative buying and selling are common in China, making markets especially volatile to rumors or abrupt shifts in investor sentiment. With so little information available, markets tend to react strongly to any development.

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

Wholesale prices, or producer price index, 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 Tuesday 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.

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