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Chinese inflation hits 28-month high

Chinese inflation has reached a 28-month high of 5.1 per cent year-on-year as food prices surged.

According to the National Bureau of Statistics of China, food prices increased by 11.7 per cent in November and non-food prices increased by 1.9 per cent.

Food prices have a one-third weighting in the calculation of China’s consumer price index and are said to account for most of the rise.

Several factors have limited supply, while demand has continued to increase.

Floods, including one in Hainan province in October, destroyed some of China’s crops. Havests have also been lower than expected in other parts of the world and the weather has been less favourable than in recent years.

November’s CPI rose faster than expected. The NBS says measures taken by the central government to control prices, especially food prices, need time to take effect.

The recent rise in food prices has reportedly caused riots in some parts of China. Some families are forced to spend up to half of their incomes on food. In November, the government announced several measures to help poorer families, including subsidies on food.

The Chinese government faces the dilemma of controlling rising inflation without choking off growth. Xinhua News Agency, the government’s official press agency, says recent rises in inflation has “heightened expectations Chinese authorities will raise interest rates”. Experts say a rate hike is necessary and will effectively control inflation and rein in housing prices.

Overall, the CPI rose by 4.9 per cent in cities and by 5.6 per cent in rural areas. Prices for consumer goods increased by 5.9 per cent and those of services by 2.6 per cent.

Other indicators published by the NBS suggest China’s industrial production as well as urban investment in fixed assets are still growing. Domestic demand has grown too.

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