06/14/2011, 00.00
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Beijing, record inflation in May. Rising food prices

Experts now expect the economy to slow, causing a cooling of inflation. But the increases mainly affect the prices of food and essentials, with growing popular discontent.

Beijing (AsiaNews / Agencies) - In May inflation in China hit a new record: +5.5%, the highest in 34 months. Industrial production also increased by 13.3% compared to May 2010, but it's the smallest increase since November, a sign that the Chinese economy is slowing down.

The predictions are that prices will continue to grow in June and Zhang Zhuoyuan, an economist at the Chinese Academy of Social Sciences, an advisory body of the government, estimated at that growth at around 6%. Experts expert the immediate intervention of the Central Bank of China (BOC), to increase interest rates (it would be such intervention the 5th since October) stop funding and decrease the money in circulation. Since October the BOC has also increased the required cash reserves for banks 8 times.

The Chinese economy grew by 10.3% in 2010 and all expected to slow this year, held back by inflation. Beijing is also trying to reshape its development model, making it less dependent on exports, given the global crisis, with the euro zone in serious difficulties because of the high external debt of some countries, the United States suffering from high unemployment and Japan lashed by the March tsunami. Beijing wants to increase domestic consumption and retail sales grew by 16.9% in May, almost in agreement with predictions of 17%.

The experts are still optimistic. Xu Gao, an economist at China Everbright Securities, said that "economic growth is declining gradually, while consumer price inflation remains under control. The central bank will increase interest rates again in May, but there will be no further increases for the rest of the year. "

But the rapid rise in prices particularly affects families and the middle class, since food prices are growing most, driven also by the severe drought of recent months that has hit rice and cereal crops. This could lead to the growth of discontent in a situation where there are already frequent protests of citizens and migrants exacerbated by the corruption of local governments and the lack of protection of their rights, including economic rights.

In March, Premier Wen Jiabao warned that rising prices and the gap between rich and poor and corruption could "even hit the government’s control of power."

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