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China's monthly CPI rebounds to 8.5%

 

BEIJING, May 12 (Xinhua) -- China's consumer price index (CPI),the main gauge of inflation, rose 8.5 percent year-on-year in April, the National Bureau of Statistics (NBS) said on Monday.

The figure, compared with 8.3 percent in March and a nearly 12-year-high of 8.7 percent in February, was broadly in line with most forecasts.

The NBS attributed the figure to a low base of comparison: the CPI rose just 3 percent in April 2007. Another factor was the rapid increase in world grain and commodity prices.

"Price rises are stable in general. Compared with March, the CPI in April was not substantially higher and prices of some items even fell," said Zhang Liqun, a macro-economist with the Development Research Center of the State Council, China's Cabinet. "That means fewer new driving factors for price rises."

Housing prices in April rose 6.8 percent year-on-year, 0.2 percentage points less than in March. Telecommunications, transportation, clothing, recreational, educational and cultural prices also fell.

"China still faced with high inflationary pressure, driven by expanding domestic demand," said researcher Yin Jianfeng at the Institute of Finance and Banking of the Chinese Academy of Social Sciences.

However, "the balance between supply and demand remained stable," said Yin.

Yin added that the government shouldn't resort to further increases in interest rates and bank reserve ratios.

The central bank has raised interest rates six times and the reserve requirement ratio 13 times since last year to curb inflation and prevent economic overheating.

Yin said higher food prices, which account for more than a third of the CPI, could stimulate the production of farm produce.

Food prices soared 22.1 percent in April, 0.7 percentage points higher than in March.

The price of meat rose 47.9 percent, with pork surging 68.3 percent. Cooking oil prices went up 46.6 percent, with vegetables up 13.6 percent and seafood up 16.1 percent.

Grain prices climbed 7.4 percent year-on-year, 0.6 percentage points up from March.

"The month-on-month rise of grain prices was small, which was not consistent with the international market trend," said Zhang. "It shows domestic farm prices were not much affected by international factors."

Grain price increases have accelerated on global markets, with wheat prices on the Chicago Board of Trade surging more than 140 percent and rice prices up more than 80 percent in March.

However, Tan Yaling, a researcher in the global financial markets department of the Bank of China, said soaring world prices of raw materials and crude oil would affect domestic price levels to a greater extent than ever, as the country's links with the outside grew rapidly.

China allowed its currency to appreciate more than 4 percent against the weakening U.S. dollar in the first quarter amid efforts to curb import prices.

It has also imposed price ceilings on domestic refined oil products and electricity despite surging world energy prices.

In the first four months of this year, the CPI rose 8.2 percent from the same period last year, or 7.8 percent in urban areas and 8.8 percent in the countryside.

The government should closely follow price fluctuations and give more priority to curbing price hikes and preventing inflation, said the NBS.

China has adopted a tight monetary policy despite increasing concern over a global economic downturn.

Fighting inflation remained the top concern of China's monetary policy makers, said Governor Zhou Xiaochuan of the People's Bank of China on Saturday.

"A big concern is whether the sharply higher food prices could trigger price rises in other sectors," said Zhuang Jian, a senior economist with the Asian Development Bank mission in China.

Non-food prices in April were up 1.8 percent year-on-year, compared with 1.4 percent in November.

The producer price index (PPI), which measures the value of finished products when they leave the factory, rose 8.1 percent in April year-on- year, setting three-year highs for a fourth consecutive month.

China's target of keeping the whole year CPI rise at about 4.8 percent would be difficult to hit, said NBS chief economist Yao Jingyuan on Sunday.

He said food prices will continue to rise in China, as the rootcause lies in the economic structure. "We have long relied on industrial growth and ignored agricultural development," said Yao. "Now the accumulated problems are exposed."

"The CPI will eventually fall later this year," said Zhang. "The slowdown of export growth should draw more attention."

Following the release of the CPI figures, the General Administration of Customs said on Monday that exports in April rose 21.8 percent year-on -year to 118.71 billion U.S. dollars, down from the 30.6-percent growth in March.

The April trade surplus dropped 1.14 percent year-on-year to 16.68 billion U.S. dollars. 

While curbing inflation, the government should attach more significance to the influence of dampened global demand on exports, which could cause an economic slowdown, said researcher Cai Zhizhou at the China Center for National Accounting and Economic Growth of Peking University.

Source: Xinhua


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