China Inflation Surges to 11-Year High

Beijing, we have a problem...... It looks like the officials now have to pay the price for all the baby steps during the past years. Thanks to Russ Winter for this interesting chart that could signal some "trouble" for the powerful....

Peking, wir haben ein Problem....... Es sieht immer mehr danach aus als wenn nun der Preis für die laxe Einstellung und den damit verbundenen Babysteps zu zahlen ist. Dank an Russ Winter für den interessanten Chart der noch zu einem ernsten Problem für die "Mächtigen" werden könnte..... Hier die deutsche Version vom Spiegel Lebensmittelpreise in China steigen um über 18 Prozent

Dec. 11 (Bloomberg ) -- China's inflation accelerated at the quickest pace in 11 years and the trade surplus swelled, adding pressure on the central bank to raise interest rates or let the currency appreciate faster to cool the economy.
Consumer prices rose 6.9 percent in November from a year earlier after climbing 6.5 percent in October, the statistics bureau said today. That was more than the 6.5 percent median estimate of 21 economists surveyed by Bloomberg News.

Surging food and fuel costs and a surplus that climbed to a record $238 billion in the first 11 months have prompted the government to name inflation and overheating as its biggest concerns. U.S. Treasury Secretary Henry Paulson, who's in Beijing for economic and trade talks, recommends currency appreciation as a remedy.

The central bank will respond with ``strict control on bank lending, further withdrawal of liquidity, one more rate hike before the end of this year and allow a faster pace of currency appreciation in 2008,'' said Liang Hong, a senior economist at Goldman Sachs Group Inc. in Hong Kong.

The yuan rose by the most in a month against the dollar on speculation rates will rise. The currency gained 0.18 percent to 7.3817 as of 10:55 a.m. in Shanghai from 7.3952 late yesterday. It reached 7.3770, the highest since a link to the U.S. currency ended in July 2005.

The yuan has gained 12 percent versus the dollar since the fixed exchange rate was scrapped. A stronger Chinese currency would lower import costs and slow money inflows by pushing up export prices.

Crackdown on Lending
The trade surplus rose 14.7 percent to $26.3 billion in November from a year earlier, the third-highest monthly total, the customs bureau said today. People's Bank of China Governor Zhou Xiaochuan said that the nation's currency policy will be used to help narrow the gap.

China has cracked down on bank lending and raised interest rates five times this year to curb inflation, asset bubbles and excessive investment leading to industrial overcapacity.

The one-year lending rate is at a nine-year high of 7.29 percent. The People's Bank of China last week ordered lenders to set aside more deposits as reserves for a 10th time this year.
Pork Prices Soar
Pork prices surged 56 percent in November from a year earlier on a pig shortage. Food makes up a third of the consumer price index and rising costs pose a threat to social stability, illustrated by a stampede last month at a cooking-oil sale that killed three people in the central city of Chongqing.

Overall, food climbed 18.2 percent. Non-food prices rose 1.4 percent, accelerating from a 1.1 percent gain in the previous month. Utility prices including water, electricity and gas rose 5.6 percent.

China's economy, the world's fourth largest, expanded 11.5 percent in the third quarter from a year earlier.