China reports inflation up sharply

By Joe McDonald
Associated Press
via Yahoo News
Monday, August 13, 2007

http://news.yahoo.com/s/ap/20070813/ap_on_bi_ge/china_inflation;_ylt=AhL...

BEIJING -- China's inflation rate accelerated to the highest monthly rate in a decade -- driven by a 15.4 percent surge in politically sensitive food prices over the year-earlier period, according to data released Monday.

Prices of pork and other meat surged 45.2 percent and eggs 30.6 percent, the National Bureau of Statistics reported.

July's inflation rate of 5.6 percent -- was the highest monthly rate since February 1997, and an increase over June's 4.4 percent rate. The next-highest monthly rate was 5.3 percent in August 2004.

Chinese leaders are worried that a boom that saw the economy grow 11.9 percent in the latest quarter might ignite inflation. They have tried to cool the boom by raising interest rates three times in the past six months, and economists expect one to two more increases this year.

A statistics bureau spokesman tried to quell fears of a pickup in overall inflation, stressing that July's sharpest increases were limited to food. Prices of clothing and other non-food goods rose just 0.9 percent in July from a year ago, according to the bureau.

"As industrial product prices and service prices remain relatively stable, the prices should not rise in an all-around and sharp way," said spokesman Li Xiaochao, quoted by the official Xinhua News Agency.

The bureau's chief economist, Yao Jingyuan, said inflation might continue to rise over the next two months due to food-price hikes, Xinhua reported. It said Yao predicted the inflation rate would fall in the final quarter of the year.

Consumer prices in the first seven months of the year rose 3.5 percent compared with the same period of 2006, the statistics bureau said on its Web site.

Chinese leaders are trying urgently to curb the sharp rise in food prices, which hit the country's poor majority especially hard.

The sharp rise in prices for pork, China's staple meat, has been blamed on farmers' reluctance to raise pigs due to high feed costs and an outbreak of blue-ear disease, which prompted authorities to destroy thousands of animals.

Beijing has promised free vaccination for the disease and other aid to farmers to raise pork output. Authorities have ordered investigations into whether farmers or food companies are colluding to push up prices.

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