Beijing: China's inflation accelerated at the quickest pace in 11 years and the trade surplus swelled, underscoring government concern that the world's fastest-growing major economy is at risk of overheating.
Consumer prices rose 6.9 percent in November from a year earlier after climbing 6.5 percent in October, the statistics bureau said today.
The government tightened rules for real-estate lending and ordered state-owned companies to pay dividends after the trade surplus pumped a record $238 billion into the economy in the first 11 months. U.S. Treasury Secretary Henry Paulson is in Beijing to press for yuan gains that would narrow the trade gap and staunch the inflow of cash.
''Liquidity from the trade surplus will continue to cause the economy to overheat in 2008,'' Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong, told Bloomberg.
The yuan gained by the most in a month against the dollar. The currency, which has climbed 12 percent since a fixed exchange rate was scrapped in July 2005, rose 0.2 percent to 7.3805 per dollar as of the 5:30 p.m. close in Shanghai from 7.3952 late yesterday. It touched 7.3770, the highest since the end of the dollar link.
Chinese regulators this week published instructions to banks to tighten lending for home purchases, citing lessons from Asian property bubbles and the U.S. subprime crisis. Inflation higher than returns on bank deposits is encouraging speculation, fueling a 9.5 percent jump in property prices in 70 cities in October from a year earlier, the biggest gain since 2005.
The Ministry of Finance said state-owned companies will be required to pay dividends of as much as 10 percent of their profits to the government. That may help curb what China's cabinet terms ''excessive'' growth in fixed-asset investment, reducing the risk of industrial overcapacity.
The trade surplus climbed 14.7 percent to $26.3 billion in November from a year earlier, the third-biggest monthly total, the customs bureau said today. The $15.2 billion trade surplus with the U.S. pushed the 11-month total with that country to $149.2 billion.
China's economy, the biggest contributor to global growth, expanded 11.5 percent in the first nine months of 2007 from a year earlier. The government has flagged a shift to a ''tight'' monetary policy in 2008 from the previous ''moderate tightening.''
For an in depth look at China's precarious economy please take a look at the cover story of the November/December issue of Seatrade. [12/12/07]
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