China Inflation Quickens; Close to Fastest Since 1996

China's inflation accelerated to close to the fastest pace in 11 years, underscoring the government's challenge of taming prices without triggering an economic slump as export demand fades.
Consumer prices rose 8.5 percent in April from a year earlier, the National Bureau of Statistics said today, after gaining 8.3 percent in March. That compared with the 8.2 percent median estimate of 22 economists surveyed by Bloomberg News.
Food prices climbed 22.1 percent and rising commodity, energy and labor costs are adding pressure to inflation. Export growth cooled in April as economies around the world weakened, Ministry of Commerce data showed last week.
``Price pressures are still very big,'' said Isaac Meng, senior economist at BNP Paribas SA in Beijing. ``Higher inflation makes people's daily lives harder and weaker growth threatens jobs -- both are important social issues and the government can't ignore either.''
The yuan traded at 6.9832 versus the dollar as of 10.20 a.m. in Shanghai from 6.9833 before the data was released.
Consumer prices rose 8.7 percent in February, the biggest gain since 1996.
Central bank Governor Zhou Xiaochuan said May 5 that there's a possibility interest rates will rise. The benchmark one-year lending rate is at a nine-year high of 7.47 percent after six increases last year.

`Number One Issue'
China's economy, the world's fourth largest, expanded 10.6 percent in the first quarter from a year earlier, down from 11.9 percent for all of 2007, as exports cooled and blizzards closed factories.
``Inflation is China's number one economic issue,'' said Donald Straszheim, vice chairman of Newport Beach, California- based Roth Capital Partners.
The jump in food prices was more than the 21.4 percent increase in March. Non-food prices climbed 1.8 percent, an unchanged pace.
Accelerating inflation keeps pressure on the government to allow faster appreciation of the yuan to cool import costs and rein in the trade surplus that is pumping money into the economy.
Gains by the currency have slowed since the start of April. The government is concerned that interest rates higher than in the U.S. and the strengthening yuan are attracting overseas money to an economy flooded with cash.

First-Quarter Gains
The yuan has climbed about 0.4 percent versus the dollar since March 31 after a 4.2 increase in the first quarter that was the biggest jump since the end of a fixed exchange rate in 2005.
International Monetary Fund Managing Director Dominique Strauss-Kahn said last week that China's currency appreciation needs ``to go further, and faster.''
China's central bank has ordered lenders to set aside more deposits as reserves three times this year, pushing the ratio to a record 16 percent. It also sells bills to drain cash from the financial system.
The People's Bank of China will raise interest rates at least once this year, according to 11 of 15 economists surveyed by Bloomberg News last month.
The government is targeting inflation of 4.8 percent this year, the same as in 2007.
The average wage in Chinese urban areas climbed 18.3 percent in the first quarter from a year earlier to 6,524 yuan ($935). Producer prices jumped 8.1 percent in April from a year earlier, the fastest pace since November 2004.