BEIJING, Aug. 13 -- Consumer price inflation in China
accelerated to the highest level in more than 10 years as food prices continue
to rise, official figure released on Monday showed, raising the pressure for the
fourth interest rate hike this year.
The Consumer Price Index (CPI), a barometer of
inflation, grew 5.6 percent in July, after a 4.4 percent rise in the previous
month, the National Bureau of Statistics said in a statement on its website.
By contrast, Producer Product Index (PPI), a measure
of inflation at the wholesale level, slowed down to 2.4 percent in July from
June's 2.5 percent, the bureau said on Friday.
In a breakdown of July's CPI figure, food prices
jumped 15.4 percent, while non-food items rose only 0.9 percent, the statement
showed.
Among foodstuffs, meat and meat products reported the
biggest jump, up 45.2 percent, followed by a 30.6 percent increase in eggs and a
30.1 percent rise in cooking oil. Grain prices went up 6.0 percent.
In July, the rural areas saw 6.3 percent price
increase, compared with 5.3 percent for the urban areas, according to the
bureau.
Inflation risks were on the rise, the central bank
admitted in its second quarter monetary report on Wednesday. It vowed to take
necessary measures to keep the basic stability in prices.
China has raised interest rates three times so far
this year, with the latest coming on July 20 when the benchmark one-year deposit
rate rose to 3.33 percent. That rate hike is coupled with a reduction of
interest tax on bank deposits to five percent from 20 percent.
However, the return on deposits is still below the
inflation rate, indicating a loss of purchasing power if people put their money
into banks.
That is encouraging an exodus of bank deposits to the
country's red-hot stock market, which has soared 77.53 percent so far this year
on top of a 130 percent rally in 2006, fueling concerns of bubbles building in
the market.
In response, analysts expect the central bank to
raise the interest rates again in the coming months to turn the real interest
rate positive, partly to offset the impact of rising prices and partly to curb
the flow of money into the equity market.
Price hike, especially in foodstuffs, is very
sensitive in China as the Chinese has a relatively low disposable income and
food accounts for a major part in people's daily spending. In 2006, the disposal
income for urban residents stood at 11,759 yuan, and at 3,587 yuan for rural
residents
NDRC, the country's top price regulator, has ordered
a crackdown on the manipulation of food prices, after several industry
associations and firms announced plans to raise prices, including instant
noodles and Chinese fast-food chains.
Meanwhile, the Ministry of Civil Affairs raised the
urban minimum living allowance for low-income families by 15 yuan a month.
The State Information Center (SIC), a think-tank
under the National Development and Reform Commission (NDRC), agreed on the
mounting price hike pressure, but sought to play down concerns over full-scale,
significant inflation in a report on Friday, citing stable prices of
manufactured products.
Lu Zhongyuan of Development Research Center of the
State Council echoed SIC's point. In the first six months, the core CPI,
excluding food and energy, rose a mere 0.9 percent, indicating the inflation is
running at a low level, Lu said.
The rationale behind using core CPI instead
of CPI is that food and energy prices are vulnerable to changes in weather and
international political situations, and it is not a good reflection of
substantial change in demand and supply.
However, the central bank suggests close attention be
paid to food prices as, unlike in developed countries, food accounts for 34
percent of China's CPI.
The State Information Center put the CPI growth in
the third quarter at 4.3 percent, up from 3.2 percent for the first half of this
year, while anticipating the growth slow down in the fourth quarter, as food
prices will gradually fall due to greater supplies.
(Source: chinadaily.com.cn)
