Rising water fees push up inflation

agldacheng

China's consumer prices rose at a faster pace in April, due largely to higher prices for utilities, figures from the National Bureau of Statistics show.

The consumer price index (CPI), a key inflation measurement, rose 1.2 per cent in April compared with the same month a year ago, accelerating from the 0.8 per cent increase in March.

For the first four months of the year, the CPI rose 1.2 per cent year on year, Friday's figures show.

Qi Jingmei, a senior economist with the State Information Centre, said the acceleration (in CPI growth) is not a surprise and should have come earlier.

\"A low CPI will hurt the country's economy, which rose 10.2 per cent during the first quarter of this year,\" she said.

Qi said April's higher CPI was mainly because of price adjustments in the cost of water in some provinces.

Prices for utilities, including water, rose 6.8 per cent year on year in April, figures from the statistics bureau show.

\"The price of utilities will continue to have a big impact on the CPI in the coming months, as some other provinces also plan to raise prices for things such as water, gas and electricity,\" she said.

Relatively lower prices for utilities have long been criticized by economists and government officials because they do not encourage a resource-efficient society.

The National Development and Reform Commission has decided to let local governments raise prices for utilities.

Because of this, the country's CPI for this year will be higher than that of last year, when the figure was 1.8 per cent, said Zhuang Jian, a senior economist with the Asian Development Bank's Resident Mission in China.

\"Utilities will play an important role in this year's CPI because prices for food and industrial products, two other major factors, will be relatively stable, \" he said.

Since a majority of the country's industrial products still suffer from oversupply due to strong investment over the past several years, companies are unlikely to pass their higher costs on to consumers, he said.

Producers, especially those that make mobile phones and cars, dare not raise their prices because of fierce market competition.

\"They prefer to lose money rather than market share,\" he said.

\"The CPI is expected to rise 1.5 per cent in the second quarter and 1.7 per cent in the third,\" Qi's centre predicted.

According to the statistics bureau, the cost of food, which accounts for about one third of the CPI, rose 1.8 per cent year on year in April after gaining 0.8 per cent in March.

Grain prices rose 1.2 per cent, the fourth straight monthly increase and the biggest gain since March 2005.

Non-food prices rose 0.9 per cent compared with 0.8 per cent in March.

The price of fuel and vehicle spare parts rose 11.2 per cent last month after a 10.6 per cent gain in March.