MercoPress. South Atlantic News Agency

China faces strongest inflation is almost 12 years

China's consumer prices increased to a 12 year high in April pushed by food prices and in spite of government pledges to tackle inflation. Annual inflation rose to 8.5% from 8.3% in March with food costs 22.1% higher in April from a year earlier, driven mainly by demand for pork.

High inflation increases worries that China's economy may be overheating. Beijing has been trying to cool price rises for staples such as pork, grain and other items by increasing supplies while imposing controls on basic goods. Food prices make up a third of the overall basket index. China's leaders are determined to avoid a replay of the late 1980s when spiraling inflation fuelled widespread public discontent and protests. Soaring food prices are especially worrisome because they hit China's poor majority hardest. "Greater prominence needs to be given to curbing inflation and controlling price rises," said the country's the National Bureau of Statistics. However, despite the government declaring it wants to tighten monetary policy in the battle against inflation, the authorities have not yet increased interest rates in 2008 compared to 2007 with six interest rises. Instead, banks have been told to increase the amount of money they hold in reserve and curb lending to limit credit growth. Zhou Xiaochuan, China's central bank governor, said on Saturday that the country would give precedence to tackling inflation over targeting growth or employment. Official data also showed that China's trade surplus in April was 16.7 billion US dollars, which represents a 1% drop from the same month a year ago. The trade surplus with Europe jumped by 34.8% 12 billion, while that with the US saw a slower growth, rising by 4% to 13 billon, according to the Chinese customs agency. The surge in exports to Europe is due in part to the rise in the Euro against China's Yuan, which makes Chinese goods more attractive to European consumers. The surge of money into the country from exports and investment poses a risk of pushing inflation even higher. However observers say that a global economic slowdown - which is resulting in richer nations importing fewer goods - may cut China's surplus.