05/09/2008, 00.00
CHINA
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Record rise in production costs, China's economy slows

Energy, food, and raw materials (especially metals) cause the greatest rise in production costs in three years. Meanwhile, the countermeasures of the government are not stopping inflation, which remains over 8%, in spite of a slowdown in exports and in demand for luxury goods.

Beijing (AsiaNews/Agencies) - Production costs in China rose by 8.1% in April, according to the national statistics office, the largest rise in three years, caused by increases in the prices of energy, food, and raw materials (especially metals).  Food prices grew by 11.9% in April, steel by 27.3%, and fuel by 10.3%.  Many believe that these increases could impact consumer prices, leading to further inflation.  Other more optimistic analysts link the increase to the accumulation of large stockpiles of raw materials by many companies that are preparing for the closing of many polluting mines and factories for a month or two, for the Olympics.

Meanwhile, inflation continues to surge, in spite of countermeasures by the government.  According to estimates by experts (the official data will be released on May 12), in April the index of consumer prices rose by at least 8.2%, after 8.3% in March and 8.7% in February.

Although inflation is not stopping, the Chinese economy appears to be slowing.  Growth in exports is slowing, to 21.8% in April after 30.6% in March; experts expect further reductions in foreign demand for Chinese products.  Domestic consumption is also slowing, especially for luxury goods: demand for automobiles rose by only 11%, while in the first three months of 2008 it had grown by 18%, and in 2007 by 22%.

Experts observe that if the inflation rate remains above 8%, it could threaten social stability, partly in consideration of the fact that there are no mechanisms for automatic salary adjustments in the country.  Today, deputy prime minister Wang Qishan repeated that inflation is the greatest economic problem facing the country, and that the government will pursue a "strict monetary policy" to cool down the economy.

Many maintain that in order to curb inflation, the yuan must be allowed to appreciate more rapidly against the dollar: after a record rise of 4.2% in the first three months of 2008, the yuan gained only 0.16% in April.  But others observe that, at this moment, rapid appreciation could reduce exports, while it seems unlikely that excess production could be absorbed by the domestic market. (PB)

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