Quake-rattled China also hit by inflation

Scott Tong May 12, 2008
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Quake-rattled China also hit by inflation

Scott Tong May 12, 2008
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Bob Moon: Trade in the shares of 45 listed Chinese companies will be suspended tomorrow. The firms are based in Sichuan province where the major earthquake hit, killing thousands. Just several hours after the quake, China’s central bank announced moves to tighten liquidity in the banking system. New numbers today show inflation in China remains stubbornly high. Marketplace’s Scott Tong has more on that from Shanghai.


Scott Tong: Consumer prices in April jumped 8.5 percent over last year, just shy of a 12-year high. Most of the sticker shock is food — pork and cooking oil, for instance. Those prices may fall back. But the cost of everyday goods, like toothpaste and diapers, is creeping up, too. And the global fear is Chinese factories are hiking prices for everyone. They face rising material and energy costs, plus rising wages and a Chinese currency up 15 percent against the dollar. Here’s economist Paul Cavey of Macquarie Securities.

Paul Cavey: The cost of goods coming out of China does go up. Depending how the rest of the world is by then faring in terms of commodity prices and these other inflationary pressures that are currently being seen, this could be quite troubling for central banks around the world.

He says it would be at least a year before the banks start freaking out. Still, many economists think China has reached a turning point, that the era of exporting ever-lower prices is over.

In Shanghai, I’m Scott Tong for Marketplace.

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