China's consumer prices rose 3.8 percent in April compared with
the same month of last year, the National Bureau of
Statistics said on Friday.
April's consumer price index (CPI), a key inflation gauge,
jumped considerably from 2.8 percent in the first quarter, the
bureau said in a statement.
Retail sales rose 13.2 percent in April to 400.2 billion yuan
(US$48.2 billion), it said in a separate statement.
Qi Jingmei, a senior economist with the State Information
Center, said the growth in retail sales is good news, because the
government wants to cool down investment but boost consumption.
But the higher CPI and the rise in producer and purchasing
prices for raw materials, fuel and energy have become major
concerns for the government, she said.
The country's strong fixed asset investment fueled both producer
prices and purchasing prices for raw materials, fuel and energy, Qi
said.
"More or less, the higher producer prices would translate into
higher CPI."
Zhu Jianfang, an economist at China Securities, said the CPI
would likely stay relatively high from the second quarter.
A higher CPI also increased the likelihood that the government
will raise the interest rate to cool down the economy.
Zhu said if CPI stays at the 3 percent level or higher in the
coming months, there would be a possibility of raising the interest
rates.
Yuan Gangming, a senior economist with the Chinese Academy of
Social Sciences, said the government should have already raised
interest rates to deal with the increasing inflationary
pressure.
"The government should adjust the interest rates timely," he
said.
Presently, the benchmark one-year bank deposit rate is set at
1.98 percent.
"People are losing out when they save their money in banks
because of low interest rates," he said.
The lower interest rates also impact people's consumption
behavior, he said.
But Wu Xiaoling, vice governor of the People's Bank of China,
said late last month the central bank has no plans to raise
interest rates in the near future.
However, if the inflation rate keeps going up, leading to an
actual negative lending rate, the central bank would consider
raising lending interest rates from the current 5.3 percent, she
said.
The central bank plans to closely follow CPI movement, Wu
said.
"If CPI growth causes a negative lending rate, which enables
corporations to make money even after they pay back the principal
and interest, the central bank will consider raising interest
rates," she said.
A negative lending rate would enable corporations to store raw
materials, and drive the inflation rate further up, Wu said.
China has taken a series of measures since last year to try to
cool down the economy, which grew 9.7 percent during the first
quarter, including raising bank reserve requirements and curbing
investment projects.
In the latest move, central authorities told local governments
they must halt utility price hikes if local inflation gets out of
hand.
The People's Bank of China said on Tuesday it would keep
monetary policy as tight as necessary.
(China Daily May 15, 2004)