Consumer prices in China rose 8.5% year-over-year in April, accelerating to near their highest rate since 1996. The staggering inflation rate was up from 8.3% in March and topped the 8.2% rate forecasts. China’s economy is heavily dependent on exports, and as demand for Chinese goods cools in the US and Europe, China’s Central Bank may be reluctant to raise interest rates and risk stalling the country’s remarkable export boom. Bloomberg:
Food prices climbed 22.1 per cent and rising commodity, energy and labour costs are adding pressure to inflation. Export growth cooled in April as economies around the world weakened, Ministry of Commerce data showed last week.
“Price pressures are still very big,” said Isaac Meng, senior economist at BNP Paribas SA in Beijing. “Higher inflation makes people’s daily lives harder and weaker growth threatens jobs — both are important social issues and the government can’t ignore either.”
Higher inflation will likely force an accelarated appreciation of the Yuan, as Chinese leaders will be eager to let the currency appreciate to reduce import costs and bring relief to the country’s struggling and sometimes restive interior.