China's Inflation Rate Jumps in November, Trade Surplus Stays High.
China's inflation surged to its highest rate in 11 years last month while its trade surplus swelled, the government said Tuesday, adding to pressure for the central bank to raise interest rates and loosen currency controls.
Rising food and oil prices lifted November's consumer price index 6.9 percent from the same period last year, the National Bureau of Statistics said. That is well above the government's inflation target of 3 percent and was the biggest increase since 1996, according to Xinhua News Agency.
The recent price rises are politically sensitive for China's communist leaders because the country's vast, poor majority spend a big share of their incomes on food and fuel. To control what appears to be an overheating economy, authorities look likely to move more aggressively in tightening credit and curbing inflation, economists said. "This will give a significant warning signal and the government will tighten measures further," said Hong Liang, a senior economist with Goldman Sachs in Hong Kong.
Meanwhile, the General Administration of Customs reported that China's global trade surplus totaled $26.28 billion in November. While that was down slightly from the previous month's record of $27.05 billion, so far this year China's trade gap has reached $238.9 billion, 53 percent larger than during the first 11 months of 2006.
Exports rose 22.8 percent to $117.62 billion, while imports rose at a faster rate, up 25.3 percent, to $91.34 billion. The figures show that foreign demand for low-cost Chinese goods remains strong despite a slew of consumer safety recalls and the weakening economic outlook in the U.S.
Top American officials are in Beijing this week for talks on Chinese product safety as well as trade, currency and intellectual property issues. The two countries signed agreements Tuesday on safeguarding the quality of food and drugs imported into the U.S. from China.
The meetings are likely to be overshadowed by protests from U.S. lawmakers over China's massive trade surplus and its currency controls, which critic say keeps the Chinese yuan undervalued, giving Chinese exports an unfair advantage. The U.S. Congress is considering several proposals to impose punitive tariffs on imports from China if Beijing fails to loosen its currency regime.
Since revaluing the yuan in July 2005, Beijing has let the yuan appreciate 8.9 percent against the dollar in tightly controlled trading. Economists argue that letting the yuan rise faster would help trim China's trade surplus while also aiding the central bank's efforts to cool inflation.
"While triggered by the food prices, the inflation issue has evolved into more of a macroeconomic problem," Citigroup Global Markets economist Yiping Huang said in a report released Tuesday. "We expect the government to let the currency rise more quickly in the coming year, alongside measures directly managing" money supply, Huang said.
Food prices, which account for one-third of the consumer price index, jumped 18.2 percent in November, compared with an increase of 17.6 percent in October, the statistics bureau said. Prices for pork, a Chinese mainstay, drove the increase. Pork prices have surged recently due to an outbreak of blue ear disease, which killed 70,000 animals and prompted the government to destroy thousands more. Beijing is pressing farmers to raise more pigs, promising free vaccinations and other aid. Price pressures should ease when a new grain crop is harvested and more pigs come to market.
But food, while important, is not the sole factor driving inflation. State-controlled prices for diesel and gasoline were raised 10 percent on Nov. 1 in an effort to curb demand amid a fuel shortage.
The government has raised interest rates and boosted bank reserve requirements repeatedly this year, seeking to curb a boom in construction and investment that regulators worry could trigger a financial crisis.
"China's tightening to-date has not amounted to much in real terms," Michael Kurtz, an economist at Bear Stearns Asia, said in a report released Monday. "China's senior leaders are growing singularly alarmed over inflation heading into 2008."
China's inflation surged to its highest rate in 11 years last month while its trade surplus swelled, the government said Tuesday, adding to pressure for the central bank to raise interest rates and loosen currency controls.
Rising food and oil prices lifted November's consumer price index 6.9 percent from the same period last year, the National Bureau of Statistics said. That is well above the government's inflation target of 3 percent and was the biggest increase since 1996, according to Xinhua News Agency.
The recent price rises are politically sensitive for China's communist leaders because the country's vast, poor majority spend a big share of their incomes on food and fuel. To control what appears to be an overheating economy, authorities look likely to move more aggressively in tightening credit and curbing inflation, economists said. "This will give a significant warning signal and the government will tighten measures further," said Hong Liang, a senior economist with Goldman Sachs in Hong Kong.
Meanwhile, the General Administration of Customs reported that China's global trade surplus totaled $26.28 billion in November. While that was down slightly from the previous month's record of $27.05 billion, so far this year China's trade gap has reached $238.9 billion, 53 percent larger than during the first 11 months of 2006.
Exports rose 22.8 percent to $117.62 billion, while imports rose at a faster rate, up 25.3 percent, to $91.34 billion. The figures show that foreign demand for low-cost Chinese goods remains strong despite a slew of consumer safety recalls and the weakening economic outlook in the U.S.
Top American officials are in Beijing this week for talks on Chinese product safety as well as trade, currency and intellectual property issues. The two countries signed agreements Tuesday on safeguarding the quality of food and drugs imported into the U.S. from China.
The meetings are likely to be overshadowed by protests from U.S. lawmakers over China's massive trade surplus and its currency controls, which critic say keeps the Chinese yuan undervalued, giving Chinese exports an unfair advantage. The U.S. Congress is considering several proposals to impose punitive tariffs on imports from China if Beijing fails to loosen its currency regime.
Since revaluing the yuan in July 2005, Beijing has let the yuan appreciate 8.9 percent against the dollar in tightly controlled trading. Economists argue that letting the yuan rise faster would help trim China's trade surplus while also aiding the central bank's efforts to cool inflation.
"While triggered by the food prices, the inflation issue has evolved into more of a macroeconomic problem," Citigroup Global Markets economist Yiping Huang said in a report released Tuesday. "We expect the government to let the currency rise more quickly in the coming year, alongside measures directly managing" money supply, Huang said.
Food prices, which account for one-third of the consumer price index, jumped 18.2 percent in November, compared with an increase of 17.6 percent in October, the statistics bureau said. Prices for pork, a Chinese mainstay, drove the increase. Pork prices have surged recently due to an outbreak of blue ear disease, which killed 70,000 animals and prompted the government to destroy thousands more. Beijing is pressing farmers to raise more pigs, promising free vaccinations and other aid. Price pressures should ease when a new grain crop is harvested and more pigs come to market.
But food, while important, is not the sole factor driving inflation. State-controlled prices for diesel and gasoline were raised 10 percent on Nov. 1 in an effort to curb demand amid a fuel shortage.
The government has raised interest rates and boosted bank reserve requirements repeatedly this year, seeking to curb a boom in construction and investment that regulators worry could trigger a financial crisis.
"China's tightening to-date has not amounted to much in real terms," Michael Kurtz, an economist at Bear Stearns Asia, said in a report released Monday. "China's senior leaders are growing singularly alarmed over inflation heading into 2008."
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