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Sat, Jun 12, 2004 - Page 12 News List

China's CPI rose 4.4% in May despite cooling steps

AP , SHANGHAI

Pedicab riders wait for passengers outside the Auto China 2004 exhibition in Beijing yesterday, where roads were so jammed outside the venue that most visitors had to walk or take a pedicab. Consumer buying continues to soar in China.

PHOTO: AP

China's consumer prices last month were 4.4 percent higher than a year earlier, the fastest increase in seven years, despite a wide range of measures taken to combat inflation, the government reported yesterday.

However, investment growth in construction, factory equipment and other fixed assets rose just 18.3 percent as compared with May last year, well below the 34.7 percent on-year increase reported in April, state-run television reported.

The fixed assets investment total for last month has not yet been officially reported by the National Bureau of Statistics. But such a sharp slowdown would show that efforts to curb lending and shrink public spending on big projects may be taking effect.

The jump in the consumer price index, China's main barometer of inflation, was the 18th straight month of increases, the statistics bureau said. The index rose 3.8 percent on-year in April, and by 2.8 percent in each of the first three months of the year.

The surge was largely due to a jump in food prices. But prices for many industrial goods fell slightly, while prices paid for housing and utilities were higher.

Officials worry that surging economic growth could set off even faster price rises, which in turn could trigger financial problems and potentially destabilizing social unrest. But last month's increase was expected, since declines in demand for key commodities are likely to lag behind any slowdown in investment.

Authorities have tried to shrink bank lending and are discouraging new investment in industries such as steel, where overcapacity is feared. Consumer prices rose 1.2 percent last year. The government says it intends to keep the full-year increase for this year within 3 percent.

Reflecting strong consumer confidence in the economy, China's retail sales rose 17.8 percent last month over a year earlier to 416.6 billion yuan (US$50.4 billion), the statistics bureau reported. In April, retail sales rose 13.2 percent over a year earlier.

Exports rose 32.8 percent on-year last month to US$44.87 billion, while imports climbed 35.4 percent on-year to US$42.77 billion, the Xinhua News Agency reported.

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