Chinese consumer prices rose for the fourth straight month last month, while new lending slowed sharply, data showed yesterday, adding pressure on Beijing to fulfill its promise to control inflation.
Analysts said the jump in prices would not trigger a knee-jerk response from policymakers in the world’s third-largest economy, but the figures raised the prospect of more drastic tightening measures later in the year.
The consumer price index, the main gauge of inflation, rose 2.7 percent last month compared with the same month a year earlier, the National Bureau of Statistics (NBS) said. The figure was higher than the market’s forecast of a 2.4 percent rise.
PHOTO: EPA
Officials insisted the increase was manageable and in line with the 3 percent inflation target put forward by Chinese Premier Wen Jiabao (溫家寶) last week in his speech that opened China’s annual National People’s Congress.
“We believe this year’s price rises will be mild and controllable, so we have to stabilize inflationary expectations,” NBS spokesman Sheng Laiyun (盛來運) told a news conference. “Judging from the current situation, investment, consumption and foreign trade are better coordinated, so we don’t see any signs of economic overheating.”
Inflation accelerated from January, when prices rose 1.5 percent, in part because the Lunar New Year holiday — when Chinese splash out on food, alcohol, cigarettes and gifts — fell last month this year.
Last year, the holiday was in January.
Bad weather also drove up food prices, Sheng said.
In the first two months of the year, consumer prices increased 2.1 percent from the same period last year. Analysts agreed the inflation spike was in large part seasonal.
“We believe this is purely the Chinese New Year holiday effect — it says nothing about rising inflationary pressure in China,” Lu Ting (陸挺), an economist at Bank of America-Merrill Lynch said. “We don’t believe that the [People’s Bank of China] will hike rates in response. We stick to our view that interest rates will be hiked in the second half.”
China has taken steps to calm inflationary pressures by ordering banks to increase their capital reserves three times since December — effectively limiting the amount of money they can lend — amid mounting fears of bad debts.
Analysts said the measures seemed to be working, with official data showing new lending reached 700.1 billion yuan (US$102.57 billion) last month, compared with 1.39 trillion yuan in January.
Property prices were up 10.7 percent year-on-year last month, however, the fastest pace in nearly two years, data released on Wednesday showed. That complicates the task for policymakers as they try to keep growth on track.
Another hike in bank capital reserves is “imminent,” while the first rate hike could come as early as next month, Morgan Stanley economist Wang Qing (王慶) said.
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