China's inflation hits 11-year high at 6.9 per cent; trade surplus at record $238 billionnews
11 December 2007

Mumbai: China's consumer price inflation accelerated to 6.9 per cent in November from 6.5 per cent in October the quickest pace in 11 years the statistics bureau said.

China's trade surplus also swelled to a record $238 billion in the first 11 months, adding pressure on the central bank to raise interest rates or let the currency appreciate faster to cool the economy.

The trade surplus rose 14.7 per cent to $26.3 billion in November from a year earlier, the third-highest monthly total, the customs bureau said.

Surging food and fuel costs and a ballooning trade surplus are causing great concern to the government.

Pork prices surged 56 per cent in November from a year earlier. Food makes up a third of the consumer price index and rising costs pose a threat to social stability.

Overall, food climbed 18.2 per cent. Non-food prices rose 1.4 per cent, from a 1.1 per cent gain in the previous month. Utility prices, including water, electricity and gas, rose 5.6 per cent.

China's economy, the world's fourth largest, expanded 11.5 per cent in the third quarter from a year earlier.

The central bank is expected to place fresh curbs on bank lending and further squeeze liquidity and possibly hike interest rate before the year-end.

Zhou Xiaochuan, governor of the People's Bank of China, said the nation's currency policy would be used to help narrow the gap.

China has cracked down on bank lending and raised interest rates five times this year to curb inflation, asset bubbles and excessive investment leading to industrial overcapacity.

The lending rate is at a nine-year high of 7.29 per cent. The central bank last week ordered banks to set aside more deposits as reserves for a 10th time this year.

The yuan also rose the most in a month against the dollar on speculation that rates will rise. The currency gained 0.18 per cent at 7.3817 as of 10:55 a.m. in Shanghai from 7.3952 yesterday. It reached 7.3770, the highest since the dollar peg ended in July 2005.

The yuan has gained 12 per cent versus the dollar since the scrapping of the fixed exchange rate. A stronger Chinese currency would lower import costs and slow money inflows by pushing up export prices.

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China's inflation hits 11-year high at 6.9 per cent; trade surplus at record $238 billion