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Inflation at a 7-month high as cold affects food prices

By Wang Yanlin (Shanghai Daily)

16:01, January 14, 2013

CHINA'S inflation rose to a seven-month high in December due to demand during the holiday and weather-induced higher vegetable prices, the National Bureau of Statistics said yesterday.

The Consumer Price Index, the main gauge of inflation, expanded 2.5 percent from a year earlier last month, compared to November's 2 percent.

Food costs, which account for a third of the CPI basket, increased 4.2 percent in December, up from November's 3 percent. Vegetable prices, which experienced supply problems because of the coldest weather in nearly 30 years, jumped 14.8 percent.

In 2012 as a whole, China's consumer prices gained 2.6 percent on an annual basis, less than the 4 percent target set at the beginning of the year and 2011's 5.5 percent.

China will maintain moderate growth in its credit supply and social financing scale this year in a bid to stabilize growth while keeping consumer prices in check, the central bank said yesterday.

The government will continue to implement a prudent monetary approach in 2013, making the policy more forward-looking, targeted and flexible, the People's Bank of China said in a statement on its website.

It will focus on stabilizing growth, economic restructuring, price control and risk prevention, and keep steady and moderate growth of credit and social financing, according to the statement.

The bank also vowed to deepen market-oriented reforms of interest rate and exchange rate regimes in 2013.

China will also step up efforts to support the development of private financial institutions this year, the central bank said.

"December's higher-than-expected inflation is mainly due to extreme coldness this winter," said Li Maoyu, an analyst at Changjiang Securities Co. "Pork price, the usual trigger of stronger inflation in the past, fell 6.2 percent last month, indicating the nature of seasonal changes in this round of inflation rebound."

Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said that as CPI growth momentum had picked up sharply and China's lunar New Year was drawing near, inflation is expected to remain high in the near term.

"China's economy recovered at a faster than expected pace in the fourth quarter of last year, which reduced the urgency to introduce new stimulus measures," said Chang Jian, an economist at Barclays.

China's trade preformed well in December, with exports surging 14.1 percent year on year and imports gaining 6 percent, dissipating fear of a double dip in the world's second-largest economy.

The Producer Price Index, the factory gate measurement of inflation, dropped 1.9 percent in December, extending a rebound trend for the fourth consecutive month but still pointing at controllable inflation in the future.

The PPI lost 1.7 percent last year, the bureau said.

China will release other key data, including the gross domestic product in the final quarter of 2012, December's industrial output, investment and retail sales next Friday.

Some analysts expect growth in the final quarter to rebound up to 8 percent, compared with 7.4 percent between July and September, the slowest in three and a half years.

Zhang Xiaoqiang, deputy director of the National Development and Reform Commission, said yesterday that economic growth may reach 7.7 percent in 2012, exceeding the 7.5 percent target. And this year's economy may expand about 7.5 percent.

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