Soaring inflation defies efforts to cool economy
By Wang Yanlin |
April 16, 2011, Saturday
|
Print Edition
Print Edition
China's inflation hit a 32-month high last month despite government efforts to cool an overheated economy, adding to pressure for more interest rate rises and other controls.
The Consumer Price Index, the main gauge of inflation, climbed 5 percent on an annual basis in the first three months.
In March alone, the index rocketed an annualized 5.4 percent, up from January and February's 4.9 percent.
Food costs rose 11.7 percent, data released yesterday by the National Bureau of Statistics showed.
March inflation was the highest since July 2008, when prices rose 7.1 percent.
The economy grew 9.7 percent in the first quarter to 9.63 trillion yuan (US$1.45 trillion), compared with the previous quarter's 9.8 percent. The nation's target is 8 percent for the year.
"Moderation in China's economy contrasts with the continuous rises of inflation," said Li Maoyu, an analyst at Changjiang Securities Co. "We can't rule out the possibility of stagflation, and policy-makers need to prepare new measures to cope with the delicate situation."
Stagflation refers to a period of economic stagnation accompanied by inflation.
Under stagflation, policy-makers can't carry out too stringent austerity measures, otherwise it will hurt an already weakening economy.
However, statistics bureau spokesman Sheng Laiyun denied there was stagflation at present.
"China's economy grew at a comparatively strong pace in the first three months, and inflation is still under control with the government's determined efforts to stabilize prices," Sheng told reporters at a media briefing in Beijing.
He said that compared with March inflation in some other emerging markets such as Brazil, which reported an annualized 6.3 percent CPI, and Russia with 9.5 percent, it was not easy for China to render such a performance.
But Sheng also said the government should get better prepared while economic uncertainties, in particular surging oil prices, were on the rise.
The central bank has raised interest rate twice this year, together with three rises in the reserve requirement ratio, to curb inflation.
Jing Ulrich, managing director of JP Morgan, said people can remain confident about China's economy as the inflation rate may peak in June or July.
China's economic growth in the first quarter was led by gains in the manufacturing sector, which accelerated 11.1 percent year on year to 4.68 trillion yuan.
The services industry expanded 9.1 percent to 4.35 trillion yuan, and agriculture added 3.5 percent to 598 billion yuan.
Industrial production advanced 14.4 percent annually, and fixed-asset investment jumped 25 percent to 3.9 trillion yuan.
Retail sales also posted stable growth, a rise of 16.3 percent during this period. The disposable income of urban residents rose 12.3 percent from a year earlier to 5,963 yuan in March, while that of rural residents expanded 20.6 percent to 2,187 yuan.
The Consumer Price Index, the main gauge of inflation, climbed 5 percent on an annual basis in the first three months.
In March alone, the index rocketed an annualized 5.4 percent, up from January and February's 4.9 percent.
Food costs rose 11.7 percent, data released yesterday by the National Bureau of Statistics showed.
March inflation was the highest since July 2008, when prices rose 7.1 percent.
The economy grew 9.7 percent in the first quarter to 9.63 trillion yuan (US$1.45 trillion), compared with the previous quarter's 9.8 percent. The nation's target is 8 percent for the year.
"Moderation in China's economy contrasts with the continuous rises of inflation," said Li Maoyu, an analyst at Changjiang Securities Co. "We can't rule out the possibility of stagflation, and policy-makers need to prepare new measures to cope with the delicate situation."
Stagflation refers to a period of economic stagnation accompanied by inflation.
Under stagflation, policy-makers can't carry out too stringent austerity measures, otherwise it will hurt an already weakening economy.
However, statistics bureau spokesman Sheng Laiyun denied there was stagflation at present.
"China's economy grew at a comparatively strong pace in the first three months, and inflation is still under control with the government's determined efforts to stabilize prices," Sheng told reporters at a media briefing in Beijing.
He said that compared with March inflation in some other emerging markets such as Brazil, which reported an annualized 6.3 percent CPI, and Russia with 9.5 percent, it was not easy for China to render such a performance.
But Sheng also said the government should get better prepared while economic uncertainties, in particular surging oil prices, were on the rise.
The central bank has raised interest rate twice this year, together with three rises in the reserve requirement ratio, to curb inflation.
Jing Ulrich, managing director of JP Morgan, said people can remain confident about China's economy as the inflation rate may peak in June or July.
China's economic growth in the first quarter was led by gains in the manufacturing sector, which accelerated 11.1 percent year on year to 4.68 trillion yuan.
The services industry expanded 9.1 percent to 4.35 trillion yuan, and agriculture added 3.5 percent to 598 billion yuan.
Industrial production advanced 14.4 percent annually, and fixed-asset investment jumped 25 percent to 3.9 trillion yuan.
Retail sales also posted stable growth, a rise of 16.3 percent during this period. The disposable income of urban residents rose 12.3 percent from a year earlier to 5,963 yuan in March, while that of rural residents expanded 20.6 percent to 2,187 yuan.
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