China’s inflation edged up last month, as Beijing shifted from containing price rises to shoring up flagging growth in the world’s second-largest economy.
Consumer prices rose 3.6 percent over a year earlier, up from February’s 3.2 percent, but below the government’s 4 percent target for the year, data showed yesterday. The increase was driven by a hike in state-set fuel prices and a 7.5 percent rise in politically sensitive food costs, up from the previous month’s 6.2 percent, but well below last year’s double-digit rates.
“It suggests inflation momentum is under control, or subdued, and there is nothing for them to do,” said Tim Condon, Asia economist for ING Financial Markets. “They must be pretty content with these numbers.”
Chinese shares closed down 0.90 percent yesterday, after data showed inflation last month was higher than market expectations of about 3.3 percent, dealers said.
The benchmark Shanghai Composite Index, which covers both A and B shares, ended down 20.77 points at 2,285.78 on turnover of 55.1 billion yuan (US$8.7 billion).
“Sentiment was hurt by China’s March inflation figure. The market is likely to undergo a correction on worries over key economic figures,” Zheshang Securities analyst Zhang Yanbin said.
The government is scheduled to release its GDP figure for the first quarter and main economic indicators for last month on Friday.
Beijing shifted focus from cooling prices to shoring up economic growth in December after inflation eased from a high of 6.5 percent in July. Beijing has promised to ease lending curbs to help companies that have been battered by a slump in global demand.
Analysts expect that economic growth, which has declined steadily over the past year, to fall to a new low of about 8 percent in the first quarter, down from 8.9 percent in the final quarter of last year.
Official statistics are due to be reported this week.
Forecasters had expected a temporary acceleration in inflation last month, but it should moderate in the coming months and come in under the official target for the full year.
Chinese leaders tightened lending and investment curbs repeatedly in 2009 and 2010 to cool inflation and guide growth to a more sustainable level.
They reversed course after a sharp fall in export demand.
The government has yet to announce major changes, but financial analysts say regulators are quietly easing access to credit. Analysts expect Beijing to lower interest rates or make more money available for lending by lowering the minimum level of reserves banks are required to hold.
JPMorgan Chase & Co said in an e-mailed note yesterday China might cut reserve ratios for banks as early as this month, and as many as two or three times this year.
The monetary authorities will not cut interest rates this year, the bank said.
Inflation should ease in the coming months, and China should be able to achieve the government’s full-year 4 percent price target, JPMorgan said.