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Tuesday 15th of June 2010
June 11, 2010    

Chinese inflation exceeds Government target

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by Kay Murchie
Chinese inflation exceeds Government target

Chinese inflation continued to increase last month on the back of rising house and food prices.

According to China’s statistics bureau, consumer prices in May were up 3.1% on an annual basis – up from April’s rate of 2.8% and exceeding the Government’s target of 3%.

A spokesperson for the bureau admitted that the pressure on inflation was “rather big”, but said prices would be controlled.

The latest figure has raised expectations that that Beijing may increase interest rates. Many economists believe higher interest rates would help the economy avoid inflationary pressures.

Meanwhile, it was revealed that China’s economy, which is the world’s third largest, expanded at an annualised rate of 11.9% in the first three months of the year.

However, despite the strong growth, economists have cautioned that the economy is expanding too quickly.

In related news, China is still under pressure to allow its currency, the yuan, to find its own level - another method of easing inflation.

The US has long been of the opinion that Beijing keeps the yuan undervalued against the US dollar to gain a trade advantage.

US legislators and trade groups say the yuan, which is also referred to as the renminbi, is kept up to 40% below what its value should be against the US dollar.

Trade talks with the US last month led China to say it would seek “gradual progress” on reforming the exchange rate of the yuan.

However, no timetable for the exchange rate reform was given.

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