Economic unrest fears weigh on Beijing
May 13, 2008
By Joe McDonald
Beijing - China's inflation rebounded last month to near decade-high levels, official data showed yesterday, adding to pressure on Beijing to cool rapid price rises and avert possible unrest ahead of the Olympic Games.
Other data showed China's trade surplus fell by 1 percent last month, which could help to ease price pressure by reducing the amount of money flooding into the booming economy.
April's consumer prices rose 8.5 percent year on year, the National Statistics Bureau said. That was up from March's 8.3 percent rate and just short of February's 8.7 percent, the highest inflation in 12 years.
"It is still far too early to claim success in the battle against inflation," said Goldman Sachs economists Yu Song and Hong Liang.
Consumer prices have been driven by rises in food costs that hit 22.1 percent last month despite government efforts to increase supplies and impose controls on basic goods.
Meanwhile, the government ordered banks for the fourth time this year to increase the amount of money they hold in reserve in a move meant to curb a lending boom. The central bank raised the portion of deposits that banks must keep in reserve by 0.5 percentage point to a record 16.5 percent.
Soaring food prices worry Beijing because they hit China's poor majority hardest.
There have been no reports of demonstrations, but bouts of high inflation in the 1980s and 1990s set off protests. The leaders want to avoid this ahead of August's Beijing Olympics.
Beijing is trying to cool a lending and investment boom that could fuel broader inflation. It has raised interest rates and tried to curb credit growth.
Prices began to rise in the middle of last year as China ran short of pork, grain and some other basic goods.
The sharpest inflation has been limited to food but costs of raw materials and energy are also edging up, raising pressure on producers.
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