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Beijing (AFP) March 11, 2011 China said Friday that inflation remained stubbornly high at 4.9 percent in February, but authorities fearful of social unrest insisted they can deliver on a pledge to keep prices in check this year. Rising costs of food, housing and other essentials have become a major source of anxiety for consumers and stability-obsessed policymakers, who are ever fearful that prolonged inflation could spark unrest. The consumer price index, the key gauge of inflation in the world's second-largest economy, was unchanged from January at 4.9 percent, and again surpassed the government's annual inflation target of four percent. Analysts had expected inflation to stand at 4.8 percent due to lower vegetable prices and much-needed snowfalls across drought-stricken northern China, according to Dow Jones Newswires. While officials said the situation was manageable, some analysts warned prices would continue to rise in the coming months. "We are confident that we can maintain this year's prices at a stable level," Sheng Laiyun, spokesman for the National Bureau of Statistics, told reporters. He emphasised that this would happen as long as "all local governments and all government departments carry out the decisions made by the central government and put curbing prices in a prominent position". IHS Global Insight analyst Alistair Thornton said the data "represents a fairly strong inflationary picture" and warned inflation had "yet to peak". "We believe inflationary pressure will remain quite high over the next couple of months," he said. "More tightening measures are in the pipeline," he added, following three interest rate hikes in recent months and a series of increases in the amount of money banks must keep in reserve, designed to squeeze lending. Chinese shares fell on concerns the high inflation rate will lead to further tightening measures, with the Shanghai Composite Index closing down 0.79 percent at 2,933.80. The statistics bureau last month tweaked the key inflation gauge by reducing the weighting of food prices while increasing the weight for rents and other housing costs. "The re-weighting improved the accuracy because food is falling in terms of peoples' spending. This is a necessary adjustment," Ken Peng, an economist at Citigroup, told AFP. The country's producer price index, which measures the cost of products at the factory gate, rose 7.2 percent year-on-year in February compared with a rise of 6.6 percent in January, as global commodity prices soared. Last week, Premier Wen Jiabao said in his speech to the annual session of parliament that reining in prices was the government's "top priority" in 2011, as the country strives for a more balanced eight percent growth rate. "Recent prices have risen fairly quickly and inflation expectations have increased," Wen said in his "state of the nation" address. "This problem concerns the people's well-being, bears on overall interests and affects social stability. We must therefore make it our top priority in macroeconomic control to keep overall price levels stable." After the data was released, central bank governor Zhou Xiaochuan said Friday that China's exchange rate policy -- the target of Western concern -- was one of several tools used to battle inflation but was not the main one. Analysts have said a stronger currency would make the country's imports cheaper and help reduce inflationary pressures in the economy. Beijing maintains a tight grip on the yuan, despite promising last June to let the unit trade more freely against the dollar following intense international pressure. Other data showed the economy maintained strong growth in the first two months of 2011, easing concerns after China returned to a trade deficit in February for the first time in nearly a year. Output from the country's millions of factories and workshops expanded by 14.1 percent on-year in the January-February period. Fixed asset investment, a measure of government spending on infrastructure, rose 24.9 percent from a year earlier while retail sales jumped 15.8 percent.
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China's inflation could hit 5% this year: state mediaBeijing (AFP) March 10, 2011 China's inflation could hit five percent this year due to soaring commodity prices and rising wages, a central bank advisor has warned, according to state media on Thursday. But Li Daokui was quoted by the China Daily as saying inflation was likely to stay below that level if agricultural production was "reasonably healthy and international commodity prices don't rise too high". Inflatio ... read more |
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