BEIJING — Diners looking for some beef hotpot on a chilly evening in Beijing pay more per pound than their counterparts in Boston, a discrepancy that shows the challenges China faces in reviving growth as inflation pressures make an untimely return.
Reuters
China’s consumer price index rose 3,2% in February from a year earlier, a 10-month high, official data released on Saturday showed. The pick up in inflation from just 2% in January was driven by a 6% increase in food costs.
Prices that rise too much could jeopardise a government preference to allow economic growth to stabilise after it eased in 2012 to its weakest full-year pace in over a decade. Growth only started to pick up in the fourth quarter after a seven-quarter-long slide.
But if policymakers move too quickly to dampen inflation, they could equally jeopardise the very growth they are trying to nurture. It is a dilemma China’s incoming leaders Xi Jinping and Li Keqiang may have hoped they would not have to face so early in the economic recovery.
“This year I think there are three priorities — to stabilise economic growth, which is not too big of a problem, and to stabilise the prices of goods, where already it looks like there could be some pressure,” said Zhao Xijun, deputy director of the Finance and Securities Institute at Renmin University. Zhao says the third priority is to reduce the risk from hidden debt.
There are already indications China’s central bank is shifting its policy focus to inflation from growth.
China needs to control inflation as a priority, the central bank said in its fourth-quarter policy report in February, shifting from a pledge in its previous report to support the economy above other needs.
