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China inflation jumps to 25-month high in October

China inflation jumps to 25-month high in October

A double-digit jump in food costs drove China's inflation rate to a 25-month high of 4.4 percent in October despite a government clampdown on credit and efforts to cool living costs.
The price rise, due mostly to a 10.1 percent increase for food, was far above the official target of 3 percent and a sharp jump from September's 3.6 percent rate, according to figures released Thursday.
While other governments try to shore up shaky growth, Beijing wants to cool inflation and restore normal economic conditions after China's quick, stimulus-fueled rebound from the global crisis. It raised interest rates last month and ordered banks on Wednesday to increase reserves in a move to curb lending.
Inflation is so far limited to food but could spread as money from a flood of bank lending that was part of Beijing's stimulus courses through the economy, said William Hess, managing director of China Analytics, a Beijing research firm.
"They're going to have to be very careful about how they manage inflation overall," Hess said. "They don't want it to spread more broadly and contribute to a broader public concern about where prices are heading."
Inflation is especially sensitive in a society where poor families spend up to half their incomes on food. Rising incomes have helped to offset price hikes, but inflation erodes the value of savings and undercuts economic gains that help support the ruling Communist Party's claim to power.
The government might decide it needs to impose price controls if the cost of basic items such as grain continues to rise, Hess said.
The rate of food price inflation has risen steadily this year, increasing from 5.7 percent in June to 8 percent in September.
October wholesale prices rose more strongly than overall consumer prices, up 5 percent over a year earlier, suggesting producers face pressure to pass on high costs to consumers.
Also Thursday, the government reported the surge in bank lending eased in October, with total loans of 587.7 billion yuan ($86 billion). That was down from September's 595.5 billion yuan _ a figure that some analysts said was so far above government plans that it might have triggered the Oct. 19 interest rate hike as a warning to lenders to curb credit.
China's post-crisis economic growth peaked at an explosive 11.9 percent in the first quarter of this year. It cooled to 9.6 percent in the three months ended September as Beijing tried to guide the expansion to a more manageable level with curbs on lending and investment.
An official cited by state media Wednesday said the full-year inflation rate was likely to exceed the 3 percent target. It was the government's first public confirmation of forecasts by private sector analysts.
Growth in factory output and retail sales also eased in October, though both still rose at double-digit rates over a year earlier, the government reported.
Industrial production rose 13.1 percent, down from September's 13.3 percent. Retail sales increased 18.6 percent.
The World Bank said last week China's inflation may stay as high as 3.3 percent through next year. It said inflation might normally run as high as 5 percent in developing economies such as China as industries grow rapidly and demand for resources shifts.
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http://www.stats.gov.cn