Wed, Nov 14, 2007 - Page 11 News List

Prices in China jump by record-tying decade high

MORE PRESSURE The biggest problem for officials was a jump in food prices of 17.6 percent, including a leap of 54.9 percent for meat, which was likely to hit the poor

AP , BEIJING

China's consumer prices rose sharply last month, tying a decade-high monthly inflation rate of 6.5 percent, the government reported yesterday, adding to pressure for measures to cool a politically sensitive surge in food prices.

Food prices jumped 17.6 percent in October over the same month last year, while the price of pork, China's staple meat, soared 54.9 percent, according to the National Bureau of Statistics.

The overall October inflation rate was higher than the 6.2 percent reported in September and matched August's 6.5 percent, the highest rate in 11 years.

"We expect more monetary tightening to rein in inflation, including further rate hikes," Lehman Bros economist Sun Mingchun (孫明春) said in a report to clients.

Inflation has surged in recent months because of double-digit increases in food prices that have been blamed on shortages of pork and other basic goods.

The food price spike is especially sensitive for the communist government because China's poor majority spends as much as one-third of its income on food.

A deputy central bank governor said last month that the government expects inflation for the full year to be 4.5 percent, overshooting the official target of 3 percent.

Inflation for non-food items last month was just 1.1 percent, the statistics bureau said.

Beijing froze prices of cooking oil and other basics in September, and is pressing farmers to raise more pigs, promising free vaccinations and other aid. Economists say price pressure should ease when a new grain crop is harvested and more pigs come to market.

Farmers had been reluctant to raise more pigs in part because of an outbreak of blue ear disease, which killed 70,000 animals and prompted the government to destroy thousands more. The government declared last week it had brought the outbreak under control.

An official of China's top planning agency, the National Development and Reform Commission, said last month that the government would consider investment curbs and other unspecified "measures to adjust prices."

The government also said last month that pork prices fell in August because of increased supplies. There was no immediate explanation yesterday for last month's sharp price increase.

Regulators raised state-set prices for diesel and gasoline by 10 percent on Nov. 1 in an effort to curb demand amid a fuel shortage. But the government said that this should add only 0.05 percentage points to the monthly inflation rate.

The government has raised interest rates several times this year to curb a boom in construction and investment that regulators worry may lead to financial problems. Economists say the inflation spike is a result of food shortages and has nothing to do with those concerns.

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