Open

Coming up

Don't miss

Replay


LATEST SHOWS

AFRICA NEWS

Rwandan singer amongst terror plot suspects

Read more

DEBATE

What's Putin's Plan? Kiev Accuses Russia of Terrorism

Read more

FOCUS

Campaigning against Bouteflika's re-election... in France

Read more

WEB NEWS

Chile: Online mobilization to help Valparaiso fire victims

Read more

ENCORE!

Art, sex, money, memory and manga

Read more

MIDDLE EAST MATTERS

Spat over Iran's UN ambassador hampers thawing relations with US

Read more

FOCUS

China trade deal: Is Taiwan's identity under threat?

Read more

IN THE PAPERS

'Call it a caretaker government'

Read more

DEBATE

Nigeria's Battles

Read more

  • Frantic search for survivors of sunken South Korea ferry

    Read more

  • Crunch talks on Ukraine in Geneva

    Read more

  • Algeria heads to the polls: ‘This election has nothing to do with us’

    Read more

  • Man executed in Texas for 2002 triple murder

    Read more

  • Scandal-hit French doctor Jacques Servier dies at 92

    Read more

  • Belgian head of wildlife reserve shot in DR Congo

    Read more

  • Stagehand of God? Maradona's legendary goal inspires a play

    Read more

  • US rolls out red carpet for French critic of capitalism

    Read more

  • N. Korea not amused by London hair salon's Kim Jong-un ad

    Read more

  • Real Madrid beat old foes Barcelona to lift Copa del Rey

    Read more

  • France's new PM targets welfare in drive to cut spending

    Read more

  • Campaigning against Bouteflika's re-election... in France

    Read more

  • Brazil club Mineiro cancel Anelka signing after no-show

    Read more

  • Syria 'torture' photos silence UN Security Council members

    Read more

  • Paris laboratory loses deadly SARS virus samples

    Read more

  • More than 100 schoolgirls kidnapped in northeast Nigeria

    Read more

  • New York police disband unit targeting Muslims

    Read more

  • 'Miracle girl' healthy after seven-organ transplant in Paris

    Read more

  • Paris police memo calling for Roma eviction ‘rectified’

    Read more

  • Burgundy digs into France's bureaucratic 'mille-feuille'

    Read more

  • French court drops ‘hate speech’ case against Bob Dylan

    Read more

  • Algeria rights crackdown slammed ahead of election

    Read more

  • Iraq closes notorious Abu Ghraib jail over security fears

    Read more

  • In ‘Tom at the Farm’, Xavier Dolan blends Hitchcock and homoeroticism

    Read more

Asia-pacific

Chinese inflation hits three-year high

©

Text by News Wires

Latest update : 2011-06-14

China reported a 5.5 percent inflation rate on Tuesday, the highest level in three years, further straining the economy and adding to popular frustration that has sparked protests in recent months.

 

AP - China’s inflation rose to its highest level in nearly three years in May, thanks largely to stubbornly high food prices, adding to economic and social strains that have fanned recent protests.
 
The 5.5 percent rise in the consumer price index reported Tuesday was in line with expectations but higher than April’s 5.3 percent and March’s 32-month high of 5.4 percent. The National Statistics Bureau said the main factor was an 11.7 percent jump in food prices.
 
While food costs are likely to moderate as supplies improve over the summer months, China is juggling conflicting goals.
 
By constraining bank lending in an effort to keep prices under control, it is pinching credit to the smaller, private businesses that drive most job creation and much of the country’s growth.
 
The spate of street demonstrations and bombings, from Inner Mongolia in the north all the way to Guangdong in the south, has highlighted the precarious balance the communist leadership is striving to maintain while keeping the world’s second largest economy growing at a stable pace.
 
Surging prices for food and other basic necessities have added to the frustrations over inequality, abuse of power and suppression of legitimate grievances that drove recent turbulence.
 
“My pension increases once a year by more than 100 yuan ($13), but I can’t afford increases in food costs,” said Ma Chuanyi, a retired elementary school teacher. “I find that what increases the most is the cheaper foods. The high-quality meat or cooking oil increases less than the cheaper ones. I think the poorer people must be affected the most.”
 
Drought and other weather disasters have decimated crops in wide parts of the country, as rising consumer demand pushes prices higher. Strong demand in construction and other industries has added to those pressures, spurred by a bank lending spree meant to fight off the impact of the 2008 global crisis.
 
There is an increased risk that rising food prices will spill into more generalized inflation, said a research note by IHS GlobalInsight economists Xianfang Ren and Alistair Thornton.
 
“It should be noted in particular that non-food inflation accelerated markedly in May to contribute to higher headline inflation,” they said.
 
In Shanghai, the country’s commercial hub, residents are feeling the pinch of surging rent and food prices.
 
“Everything is becoming more and more expensive. My landlord hit me with a rent increase yesterday, after raising it almost every year. Vegetables and meat are also expensive,” said Zhang Shihua, an online clothing shop owner from neighboring Anhui province who has lived in the city for eight years.
 
“We’re now considering moving back to Anhui,” she said.
 
Mindful of inflation’s role in eroding the economic gains that underpin their claim to power, China’s communist leaders have made taming prices a priority, while seeking to steer economic growth from the sizzling 9.7 percent rate in the first quarter to a more sustainable level.
 
The government reported Monday that bank lending slowed in May, indicating that repeated interest rate hikes and increases to reserve requirements may finally be reining in the excess lending that has helped drive prices higher.
 
“Weakening credit growth and a slowing economy present a policy dilemma when inflation is still high,” said Mark Williams, senior China economist at Capital Economics.
 
May’s figures indicate mixed results.
 
Investments have remained relatively strong in real estate and in state-dominated heavy industries, where excess capacity remains a big problem.
 
China’s industrial output rose 13.3 percent in May, the statistics bureau reported, while investments in construction, factory equipment and other “fixed assets” rose 25.8 percent in January-May over a year earlier. Investment in property jumped a whopping 34.6 percent.
 
Authorities recently announced initiatives aimed at encouraging more lending to smaller businesses that comprise the relatively dynamic part of the economy. But the persistence of inflationary pressures both at home and globally has prompted economists at the World Bank and private research institutes to urge that Beijing not loosen controls too hastily.
 
“A combination of solid growth and rising inflation means that policy makers should, and can afford to, tighten monetary conditions further,” said Dariusz Kowalczyk of Credit Agricole in Hong Kong.
 
Beijing has hiked interest rates four times since October and ordered companies to hold down prices.
 
Many in China expect the central bank to go ahead with at least one more interest rate hike this month or next, especially with state media reports forecasting that inflation could rise further, to about 6 percent, in June.
 
May’s price increase was the fastest since July 2008, when inflation clocked in at 6.3 percent. It peaked at 8.7 percent in February 2008 but fell back under the shock to export demand from the global crisis.
 
Prices are heavily weighted in China’s calculation of its consumer price index, a reflection of the relatively large share of spending that goes to food.
 

 

Date created : 2011-06-14

  • TRADE

    US and China agree broad deal on economic relations

    Read more

  • DIPLOMACY

    Clinton slams China's human rights record as 'deplorable'

    Read more

  • CHINA

    China probes artist-activist for 'economic crimes'

    Read more

Comments

COMMENT(S)