BEIJING - The retail
price of pork in China, the country's staple meat,
soared 77.6% in August from the same month a year
ago, though it began to decline in the middle of
the month, according to the National Development
and Reform Commission (NDRC), the country's top
economic-planning body.
In the 36 major
Chinese cities monitored by the commission, the
price of pork in late August was slightly down,
3.1%, to 26.6 yuan (US$3.5) per kilogram from the
first 10 days of the month, but the
monthly price was still 7.75%
higher than in July.
The sharp rise in
food prices, mainly fueled by rising pork prices,
pushed up the annual growth rate in the Consumer
Price Index (CPI), China's key inflation
indicator, to 6.5% in August, the highest in 11
years, triggering divergent opinions on China's
inflationary prospects.
Pork prices are
unlikely to drop drastically for the rest of the
year because of rising demand and mounting
production costs, while egg prices will continue
to go up as the Moon Festival (which falls on
September 25 this year) and the October 1 National
Day golden-week holidays approach, the Ministry of
Commerce predicted this month.
As demand
remained strong, prices of non-staple foodstuffs
also surged, with chicken up 29.4%, eggs up 25.5%
and rapeseed oil up 45.6% from a year ago. The
average price of 15 kinds of vegetables, including
tomatoes, cucumbers and eggplants, rose 17.1%
year-on-year.
Joerg Wuttke, chairman of
the European Union Chamber of Commerce in China,
said China's CPI has been driven up by rising food
prices, while annual growth in the country's core
CPI, excluding food and energy prices, is below
1%.
Latest figures from the National
Bureau of Statistics (NBS) showed the accumulative
increase of the main gauge of inflation reached
3.9% in the first eight months, overshooting the
3% target set by the government.
A report
by Changjiang Securities said the country is
likely to raise the key interest rate again this
month. Li Maoyu, an analyst with the securities
brokerage house, said the central bank will raise
the benchmark rate to a level in line with
inflation.
Yao Jingyuan, chief economist
with the NBS, said the CPI inflation rate is
unlikely to grow drastically in the coming months
and could drop in the fourth quarter.
The
August CPI growth figure exceeded the 5.8%
prediction of Li Huiyong, a senior analyst at
Shenyin & Wanguo Securities, but matched that
of the DBS Bank, which said in its latest report
that August's year-on-year CPI growth would exceed
6%. Food prices ballooned by 18.2% year-on-year in
August, and consumer goods jumped by 8%.
Meanwhile, the prices of non-food products rose
0.9%, said the bureau.
China's Producer
Price Index (PPI) for manufactured goods was up
2.6% in August over the same period of last year.
The PPI of consumer goods jumped 3.5%, and the
price index of food swelled by 8.6%, compared with
the growth rate of 1.2% for garments and 1.8% for
daily commodities, the NBS said on Monday.
Analysts say rising producer prices have
driven up consumer prices. The CPI increased 5.6%
in July, 4.4% in June and 3.5% year on year in the
first seven months of this year, according to the
NBS.
However, Qiu Jin, managing director
of research for China International Capital Corp,
said that the CPI inflation rate might edge down
after reaching a peak in August, adding that the
it would stay between 3.4% and 3.6% for the whole
year.
Last week, Bi Jingquan, vice
director of the NDRC, said China's price hikes in
the first seven months were mainly caused by
food-price increases. The country is capable of
maintaining overall price stability after food
prices are properly addressed, he stressed.
Increasing inflationary concerns
intensified expectations of further interest-rate
hikes though the country has just ordered banks to
set aside more as reserves for the seventh time in
less than a year.
Zhou Xiaochuan, governor
of the People's Bank of China (PBoC), said at a
recent meeting of the Bank of International
Settlements that the central bank is ready to
fight inflation.
To counter rising
inflation, the central bank has raised the
one-year benchmark deposit interest rate four
times, to 3.6%, since the beginning of this year.
The PBoC announced the decision last week
to raise the reserve requirement ratio by half a
percentage point for commercial banks, to 12.5%,
starting from September 25, in a bid to "control
excessive bank lending".
The move came
after China reduced the tax on interest income to
5% from 20% from August 15 and raised the
benchmark interest rate four times this year.
To reduce liquidity in the banking system,
the Ministry of Finance has increased the issue of
Treasury bonds.
The country's commercial
banks lent 2.77 trillion yuan ($367 billion) from
January to July, equivalent to 90% of last year's
total.
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