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At 3.8% China's April CPI higher than it forecasted

A man's reflection is distorted by a metal plate near figurines of the god of prosperity and the god of longevity on display at a shop in Beijing yesterday. The government reported yesterday that consumer prices rose 3.8 percent last month over a year earlier. PHOTO: AP

Consumer prices rose 3.8 percent last month over a year earlier, the government reported yesterday, as it issued an order to banks to curb lending that is fueling inflation.

The jump in the consumer price index, China's main barometer of inflation, exceeded analysts' forecasts and was well above the 3.2 percent seven-year high set in February. Consumer prices rose 3 percent in March.

The government's target for inflation this year is 3 percent.

Officials worry that China's surging economic growth could ignite inflation and lead to financial problems. They have tried to shrink bank lending and are discouraging new investment in such industries as steel where they fear dangerous overcapacity.

The higher-than-expected price rise last month, over a year earlier, was likely to reinforce expectations that regulators will raise interest rates to help curb bank lending.

Intensifying their appeals to banks to tighten credit, the central bank, banking regulator and industry policy-making bureau jointly issued a notice to curb lending to some projects in certain sectors, major securities newspapers reported yesterday.

The notice aims to prevent "blind" investment in some sectors, especially in projects that use old equipment and lack technology, according to the state-run China Securities Journal, which ran the story on its front page.

Authorities have already boosted banks' reserve requirements and imposed price controls on some commodities in an attempt to tame economic growth, which surged 9.7 percent in the first quarter.

In another sign of strong economic momentum, the government reported that retail sales jumped 13.2 percent last month over a year earlier, to 400.2 billion yuan (US$48.5 billion). In March, retail sales climbed at an annual rate of 11.1 percent.

The sharp rise in retail sales, a key indicator of consumer confidence, was exaggerated by the relatively low level of growth in retail sales in April last year, amid the SARS outbreak that dis-couraged many Chinese from activities such as shopping, dining out and traveling.
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