China consumer prices hit seven-year peak
(Agencies)
Updated: 2004-06-11 15:43

China's consumer prices rose at an annual rate of 4.4 percent in May, the fastest increase in seven years, largely due to a jump in food prices, the government reported Friday.

Investment growth in construction, factory equipment and other fixed assets rose just 18.3 percent, well below the 34.7 percent increase reported in April, China Central Television (CCTV) reported.

The fixed assets investment total for May has not yet been officially reported by the National Bureau of Statistics. But such a sharp slowdown would show that efforts to curb lending and shrink public spending on big projects may be taking effect.

The jump in the consumer price index, main barometer of inflation, was the 18th straight month of increases, the statistics bureau said. The index rose at an annual rate of 3.8 percent in April, and by 2.8 percent in the first three months of the year.

The surge was largely due to a jump in food prices. Grain prices soared by an annual rate of 32.3 percent, edible oil prices were up 24.6 percent, and prices for fresh fruits, meat products and eggs all rose by about 20 percent.

Prices for many industrial goods fell slightly, while prices paid for housing and utilities were higher.

Officials worry that surging economic growth could set off even faster price rises, which in turn could trigger financial problems and potentially destabilizing social unrest. But May's increase was expected, since declines in demand for key commodities are likely to lag behind any slowdown in investment.

Authorities have tried to shrink bank lending and are discouraging new investment in industries such as steel, where overcapacity is feared.

Central bank officials have said they would consider more severe measures to cool the economy, such as an interest rate hike, if the inflation rate hits 5 percent.

Consumer prices rose at an annual rate of 1.2 percent in 2003. The government says it intends to keep the full-year increase for 2004 within 3 percent.

China's economy grew at an annual rate of 9.7 percent in the first quarter of the year, and is expected to expand by 9.8 percent for the first half _ well above the government target of 7 percent for all of 2004.

Reflecting strong consumer confidence in the economy, China's retail sales rose 17.8 percent in May over a year earlier to 416.6 billion yuan (US$50.4 billion), the statistics bureau reported.

In April, retail sales rose at an annual rate of 13.2 percent.