Inflation in China

Estamos iniciando uma nova categoria sobre a China.  E nada mais interessante do que noticiar sobre sua economia, e com um post que saiu no Financial Times do dia 11/11/2010, cujo original saiu aqui!

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By Geoff Dyer in Beijing

Published: November 11 2010 04:11 | Last updated: November 11 2010 14:16

China inflation surges to 25-month high


Chinese inflation jumped to its highest level in just over two years in October, prompting new fears that the economy could be overheating as a result of the government’s huge stimulus measures.

Consumer price inflation surged to 4.4 per cent in October from 3.6 per cent the month before, well above the government’s target of 3 per cent and increasing the pressure on the authorities to introduce new tightening measures.

The country’s banks are also on track to exceed this year’s quota for bank lending after new loans reached Rmb587.7bn ($88.7bn, £55bn, €64.7bn) in October. Economists said that to meet the full-year target of Rmb7,500bn, there would need to be a sharp contraction in new bank lending in the past two months of the year.Although inflation in China has been inching up for some months, the big jump in October surprised many economists and raises the chances of further interest rate rises this year to follow the increase last month and the increase in bank reserve requirements announced on Wednesday.

Beijing is also under pressure from other governments to accelerate the appreciation of its currency – a topic that will be prominent at Friday’s G20 summit – which could help damp inflationary pressures. At the close of Asian trading on Thursday, the Chinese currency had gained almost 1 per cent against the dollar over three days.

Li Wei and Stephen Green at Standard Chartered in Shanghai said that on a seasonally adjusted basis, consumer price inflation increased at an annualised rate of 12.1 per cent in October, up from 5.2 per cent the month before. “This is worrying as inflation is now heading towards its level in mid-2007, which was a time of overheating,” they said in a note.

Earlier this week, Zhang Ping, head of the National Development and Reform Commission, the main economic planning body, acknowledged inflation would exceed the 3 per cent target this year. He blamed the weaker US dollar, speculation in commodities’ markets and loose monetary conditions.

Several Chinese officials have warned in recent weeks that the new round of quantitative easing in the US will lead to hot money inflows into developing economies, and the Chinese foreign exchange regulator has taken steps this week to reduce capital inflows in the financial system.

However, many economists believe that it is relaxed monetary policy in China which is adding to the domestic inflationary pressures, rather than capital inflows from overseas. “There is no trick to keeping growth afloat on a sea of credit, the question is what happens when the lending taps are turned off,” said Tom Orlik, an economist at Stone & McCarthy in Beijing.

Jun Ma at Deutsche Bank predicts that the authorities will relabel monetary policy from “relaxed” to “prudent” at an economic policymakers conference in December, which would signal a reduction in the planned growth of new loans for next year. Some economists predict the government might introduce some form of price controls if the inflation rate remains at this level.

“China needs to do more to keep this year’s inflation under the target ceiling,” Sheng Laiyun, spokesman for the statistics bureau, said on Thursday.

Other figures released on Thursday suggested the economy continues to expand at a strong rate. Industrial production increased 13.1 per cent in October compared to the year before, while retail sales expanded by 18.6 per cent, year-on-year.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.

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