Inflation rises to 6.5%, macro control made harder

By Wen Sheng (People's Daily Online)

10:09, August 09, 2011

China’s inflation accelerated in July, as the National Statistics Bureau reported on Tuesday that consumer price index rose 6.5 percent year-on-year, hitting a three-year high. 

Most market analysts say the CPI numbers were unexpectedly elevated, which could make the job of Beijing authorities to manage the world’s second largest economy more difficult. 

As the prices keep growing, the People’s Bank of China, the central bank, would be under mounting pressure to raise interest rates, a measure that could chimp economic growth. 

China is now saddled by two seemingly contradictory phenomena: prices have kept climbing up for a consecutive nine months, which demands the central bank to go on tightening its monetary policy to tame inflation; and, the debt woes in the United States, Europe and Japan, are slowing down global growth that could negatively impact China. 

The downgrade of the U.S. national credit by the Standard & Poor’s on Friday has triggered a bout of global stock markets, with the Dow Jones plunging 5.55 percent, or 634 points, on Monday. 

The National Statistics Bureau said that the CPI’s stubborn rise in July was mainly caused by price rises in food including pork, eggs and edible oil, which surged 14.8 percent. 

The inflation isn’t showing any signs of abating. The bureau said the producers’ price index (PPI), a gauge tracking price levels of industrial manufacturers, increased 7.5 percent year-on-year. It means that inflation may continue to go up in the next few months, as industrial products’ prices have risen and would be translated to CPI. 

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