Business

China's inflation accelerates as house prices soar

Shanghai
Image caption New luxury housing in Shanghai helped to fuel China's inflation rate

China's inflation accelerated in April after house and food prices jumped and bank lending increased.

The news will fuel concerns that the world's third-largest economy is overheating and that Beijing may need to raise interest rates.

April's consumer prices were up 2.8% from a year ago, the highest rate in 18 months, and property inflation hit 12.8%, China's statistics bureau said.

New bank lending of 774bn yuan ($8.4bn; £5.65bn) exceeded predictions.

Many analysts had forecast an inflation rate of 2.7%.

Foreign investors are watching closely to see whether Beijing moves to cool prices, as this would slow China's economic growth.

Standard Chartered economist Jinny Yan said he did not think there was an immediate danger of an interest rate rise because of the European debt crisis and fragile international economy.

"What [Beijing] will do is observe external markets for a while longer before deciding what to do," she said.

But Brian Jackson, strategist at Bank of Canada, was not so sure. "Price pressures have been building throughout the economy, strengthening the case for higher interest rates and a stronger yuan... China is at risk of overheating," he said.

Industrial output rose 17.8% year-on-year in April, while retail sales were up 18.5% to 1.15 trillion yuan.

China's economy grew at an annual rate of 11.9% in the first quarter, driven by Beijing's 4 trillion yuan stimulus package.

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