Food Prices Boost Inflation
Sydney Morning Herald
Tuesday March 11, 2008
CHINA'S inflationary pressures are rapidly building just as the US-led economic downturn starts to corrode China's trade surplus, new figures show.
Upstream producer prices rose 6.6 per cent in the year to January while export growth slowed to 6.5 per cent, its lowest rate in six years. Slowing exports slashed the trade surplus by two-thirds.Economists are concerned that Chinese policy-makers will not stop surging meat and grain prices from pushing up prices everywhere - ultimately triggering an economic downturn.Macquarie Bank's China economist, Paul Cavey, said a recent jump in Chinese wholesale agricultural prices indicated inflation could hit double figures for the year to February. The figures are due to be released today."It's like it's going to be somewhere between 8 and 10 per cent," he said. "There will be a policy reaction, but the big risk is they lack the policy tools to prevent food price inflation from becoming general inflation."Premier Wen Jiabao last week said fighting inflation was the people's top priority. But his efforts are hamstrung by government reluctance to let the yuan rise more quickly. China's annual trade surplus fell from $US19.6 billion ($21.2 billion) in January to $US8.6 billion in February.
© 2008 Sydney Morning Herald