China's consumer price index rises 4.8% in 2007
China saw its last year's inflation rate rise 4.8 percent, the highest level in more than a decade, which may force the government to take further tightening measures.
The National Bureau of Statistics (NBS) on Thursday announced the yearly figure of consumer price index (CPI), the main gauge of inflation, picking out food prices, especially the pork price, as the top propelling force.
Food prices ballooned 12.3 percent last year, driving up the CPI figure by 4.0 percentage points, said Xie Fuzhan, director of the NBS, at a press conference.
The average price of fowl and related products rose 31.7 percent in 2007 and the egg price increased 21.8 percent, Xie said.
In addition, he said, surging pork prices had kept the CPI figure above 4 percent since June. The bureau did not, however, break out pork prices separately in Thursday's report.
"The pork price was underestimated in 2006, which resulted in a sharp decline in pigs, especially sows. The shortfall was further aggravated by a pig cull following a serious outbreak of blue-ear disease last year," he said.
Soaring world commodity prices were another factor that helped drive the CPI to its highest level since 1997. For example, crude oil prices exceeded $100 per barrel for the first time at the beginning of this year, up from about $25 in 2003, and edible oil prices nearly doubled last year on international markets, Xie said.
It was necessary to "set China's inflation rate against a worldwide backdrop. India reported a CPI rise of 5.2 percent last year, Russia 9.4 percent, and even the United States is expected to have a 2.8 percent increase, and Europe has an average rise of above 2 percent," he said.
"Generally speaking, China is not alone. The new round of inflation is a global trend," he said.
Money supply also lifted prices, he added. M2, a broad measure of money supply, was 40 trillion yuan (about $5.5 trillion) last year.
The NBS also reported a 2007 trade surplus of $262.2 billion, up $84.7 billion from 2006. Foreign exchange reserves surged 43.3 percent to $1.53 trillion by the end of 2007.
With an eye on inflation risk, China has stepped up tightening moves.
A week ago, the central bank announced it would raise the bank reserve requirement ratio by half a percentage point to 15 percent effective January 25, the first raise for this year. The bank raised the reserve ratio 10 times last year as part of an effort to reduce excessive liquidity.
A record 1.27 trillion yuan worth of central bank bills, which had been issued to commercial banks to curb lending, are due to mature in the first quarter, according to government figures.
The State Council, or the cabinet, also announced earlier this month that the central government would temporarily intervene in the prices of daily necessities under the Price Law.
It promised not to raise the prices of key commodities or services such as energy (gasoline, natural gas and electricity) as well as utility charges (gas, water and heating) and urban public transport. It also promised strong penalties on those who drove up prices through hoarding or fraud.
"We are facing an arduous task in reining in prices this year. Even if there are no new factors to [increase] prices, the lingering effects of last year's hikes [will continue to exert] great pressure," Xie said.
"The Party and the government have listed price curbs as an important task, which I think is at the core of our economic problems and will take effect after a period of time," he said.
