China: Inflation Up, Economy Down

Again, China is the largest trading partner of Korea. China’s inflationary spiral has significant implications for Korea.

From Bloomberg:

China’s inflation held above 5 percent in April and lending exceeded analysts’ estimates, signaling that further monetary tightening may be needed to cool the fastest-growing major economy.

Consumer prices rose 5.3 percent from a year earlier and banks extended 740 billion yuan ($114 billion) of local-currency loans, according to reports from the statistics bureau and central bank. Weaker industrial-output growth, also reported today, may diminish price pressures in coming months.

Today’s data showed that inflation has exceeded Premier Wen Jiabao’s 4 percent target each month this year. The figures may buttress the case made by U.S. Treasury Secretary Timothy F. Geithner in annual bilateral talks in Washington this week that China needs a stronger yuan to contain prices and spur domestic demand.

Today’s report showed a 25.4 percent increase in fixed- asset investment in the first four months of the year. That figure, combined with a report yesterday showing record export shipments in April, indicates the world’s second-biggest economy has made limited progress in shifting to a growth model more driven by domestic demand.

“The data looks bad,” said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong. “The economy is slowing more sharply than expected but inflation is not.”

Inflation is “the most pressing problem” facing China, Vice Premier Wang Qishan said at the Washington talks.

http://www.bloomberg.com/news/2011-05-11/china-inflation-over-5-signals-officials-may-boost-yuan-interest-rates.html