China Inflation At Highest Level In Over A Decade

By Claudia Blume
Hong Kong

China's Inflation Rate Jumps to Highest Level in More Than a Decade

China's inflation rate reached the highest level in more than a decade in November, while the country's trade surplus continued to soar.

China's government said on Tuesday that the country's consumer prices - a key indicator for inflation - went up 6.9 percent in November compared to a year earlier. This is the highest inflation level in more than a decade.

Andrew Freris, chief economist for the Asia Pacific region at BNP Paribas Bank in Hong Kong, says the reason the consumer price index was so high in November was not a further increase of food prices.

Rather, the government had raised state-set prices for diesel and gasoline by ten percent in an effort to curb demand amid a fuel shortage.

He says while food prices are higher than a year ago, meat prices in November increased at the same level as in October.

"Meat prices are now stationary in the sense that they stopped accelerating and I expect that the December prices will show that they are now coming down," he said.

Freris expects the inflation rate to come down to about five percent in December.

Inflation has surged in recent months - mainly because of double-digit increases in food prices especially of pork, China's staple meat. This is due to shortages after a disease killed millions of pigs and because of the rising cost of feed grains.

Beijing is worried about mounting public anger over inflation. To contain the country's inflation surge, the government froze several of the prices it controls in September, for example for cooking oil and coal, and encouraged farmers to breed more pigs.

China's trade surplus, meanwhile, remained high in November, totaling more than $26 billion.

The numbers suggest that the demand for goods made in China remains strong - despite mounting worries over product safety and several recalls by foreign toy companies this year.

The country exported goods worth more than $117 billion - up 22 percent from the same month last year. But Freris says imports rose at an even faster pace, going up 25 percent.

"If you have an economy which is growing fast it should be absorbing a lot of imports - particularly now that the renminbi for two-and-a-half years has been slowly appreciating, thereby making imports cheaper," said Freris.

The release of China's newest economic figures comes as a team of United States officials, led by Treasury Secretary Henry Paulson, arrived in Beijing on Tuesday for high-level talks about trade and product safety.

ENDS

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