Government: China's inflation to rise in June

AP News
Posted: Jun 22, 2011 5:32 AM
Government: China's inflation to rise in June

China's surging inflation should rise again this month after flooding damaged crops and pushed up food costs, the government said Wednesday.

Communist leaders have declared taming soaring living costs their priority this year and have been frustrated as inflation climbed steadily, hitting a 34-month high of 5.5 percent in May. Inflation is especially dangerous for the ruling party because it erodes economic gains on which the communists base their claim to power.

"The estimate is that the overall price increase in June will be higher than May," said a statement by the National Development and Reform Commission, the Cabinet's economic planning agency. It gave no specific June target.

In the second half of the year, "new price increases should decline and prices for the full year can be controlled," the statement said.

The agency said floods in eastern and southern China that damaged crops were partly to blame. The May price rises were driven by an 11.7 percent jump in food costs.

Earlier reports by state media cited farmers who said vegetable output in some areas was down 20 percent. The official Xinhua News Agency said prices of green vegetables were up 40 percent in some areas.

Private sector analysts blame China's inflation on the dual factors of demand fueled by higher incomes that is outstripping food supplies and the effects of a bank lending boom that helped the country ward off the 2008 global crisis.

Beijing is trying to cool an overheated economy that grew at a sizzling 9.7 percent rate in the first quarter of the year.

The government has raised interest rates four times since October and has told banks to increase their reserves to limit lending.



National Development and Reform Commission (in Chinese):