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China's inflation is growing at a slower pace than the central bank's annual target as increases in heavily weighted food prices ease. The Consumer Price Index gained three percent in April from a year earlier after rising 3.3 percent in March, the National Bureau of Statistics said Monday.
That matched the central bank's three-percent target this year and was the first decline in growth since October. Prices climbed 2.8 percent for the first four months combined.
"The inflation level, together with the strong lending and money supply, may add pressure on the central bank to apply more substantial tightening measures such as an interest hike in the coming months to slow prices growth and drain cash from the economy," said Li Mingliang, an analyst at Haitong Securities Co.
The People's Bank of China has ordered seven rises on the reserve-requirement ratio and three interest-rate increases since the middle of last year to stem price increases and soak up cash in the financial system.
The latest reserve-requirement increase, announced on April 29, takes effect today.
"Inflationary pressures still exist given the fast economic growth, strong domestic demand and tight food supply," the central bank said in its quarterly monetary-policy report.
The economy expanded a faster-than-expected 11.1 percent in the first quarter from 2006, powered by strong investment, consumption and overseas sales. The trade surplus widened to US$16.88 billion last month from the US$6.9 billion in March.
"Going forward, we expect exports growth to remain robust amid firm global demand, and the trade surplus to remain large," said Liang Hong, an economist at Goldman Sachs.
M2, the broad measure of money supply, gained 17.1 percent in April, outstripping the government's target of 16 percent for 2007. Over the past month, food prices, making up one third of the total index, advanced 7.1 percent from a year earlier, after climbing 7.7 percent in March. Grain prices climbed 6.1 percent after rising 6.4 percent in a month earlier.
Editor: Yan
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