Business

China's inflation eases due to tightening measures

Inflation in China's rapidly growing economy has cooled slightly, raising hopes that government efforts to fight inflation are beginning to take effect.

The annual inflation rate fell to 5.3% in April from a year earlier, down from a three-year high of 5.4% in March.

Other figures also showed industrial output growth slowed last month.

Premier Wen Jiabao has said cooling growth is a top priority. Rising food, fuel and housing prices have been identified as serious problems.

Food price rises, which are the main factor behind overall inflation remain stubbornly strong, increasing at an annual rate of 11.2%, but have fallen back from last month's high of 11.7%.

"Price pressures are still uncomfortably strong, but there are some signs in today's data that policy measures put in place over the last six months or so are having an impact," said Brian Jackson, a Hong Kong-based economist with the Royal Bank of Canada.

"In the meantime, though, inflation is too high and will keep the policy bias in favour of more action over the next few months."

Mr Jackson expects China's central bank to continue to raise borrowing costs, and to allow the yuan currency to strengthen further against the US dollar.

A stronger currency brings down the cost of imported items such as fuel and food.

Social unrest

Since October, Beijing has imposed a raft of measures to reduce food, fuel and housing costs.

But the tension caused by higher prices is growing.

In April, hundreds of drivers in Shanghai took part in three days of protests against rising fees and fuel prices.

The industrial action was a clear sign to Beijing that it must succeed in taming inflation.

Andrew Batson, research director at Dragonomics in Beijing, said he expected prices to come down in the coming months.

"The government's previously loose monetary policy was the fundamental driver behind price rises," he said.

"Now that Beijing is tightening, we believe inflation will fall."

In an attempt to slow price growth, China's central bank has already raised the cost of borrowing four times since October, and asked banks to hold more money instead of lending it out.

Besides the consumer price index, the National Bureau of Statistics said factory output in April rose by 13.4% from a year ago, much less than economists' forecasts and lower than the March figure of 14.8%.

Investment in fixed assets such as roads, buildings and factories also climbed, by 25.4% in April, slightly higher than expectations.

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