China's inflation gains pace

BEIJING - China's inflation accelerated, bank lending exceeded estimates and property prices jumped by a record, increasing pressure on the Government to raise interest rates and let the currency appreciate.

Consumer prices rose 2.8 per cent in April from a year earlier, the fastest pace in 18 months, and property prices jumped 12.8 per cent, the Statistics Bureau said yesterday. New lending of 774 billion yuan announced by the central bank, was more than any of 24 economists forecast.

Chinese policy makers should focus on preventing excessive gains in asset prices and liquidity as Europe's rescue package makes another global slump less likely, central bank adviser Li Daokui said.

The increase in property prices across 70 cities was the most since data began in 2005, defying a government crackdown on speculation that intensified last month.

"Price pressures have been building throughout the economy, strengthening the case for higher interest rates and a stronger yuan," said Brian Jackson, a strategist at Royal Bank of Canada. "China is at risk of overheating, with spot fires breaking out in various parts of the economy."

The gain in consumer prices compared with a 2.4 per cent increase in March and the 2.7 per cent median estimate of 30 economists surveyed by Bloomberg News. Producer prices jumped 6.8 per cent,.

China's Government aims to contain full-year inflation at 3 per cent and avert property bubbles after record credit growth drove an economic rebound. Investors are concerned stimulus withdrawal and a slowdown in construction could choke growth after an 11.9 per cent expansion in the first quarter.

Industrial production rose 17.8 per cent in April from a year earlier, after an 18.1 per cent gain in March.

Baoshan Iron & Steel, China's largest publicly traded steelmaker, has been running plants at full capacity as carmakers including General Motors said they can't build enough vehicles to meet demand.

While developers Guangzhou R&F Properties and China Overseas Land & Investment are reporting slowing sales as the Government intensifies the crackdown on property speculation, April prices rose 12.8 per cent, the most since data began in 2005.

Besides tightening rules for second and third-home purchases, China has increased banks' reserve requirements three times this year, withdrawing cash from the financial system.

- BLOOMBERG