China's inflation rate accelerated at a pace of 8.5 percent in April, the National Bureau of Statistics announced this morning.

The consumer price index, the main gauge of inflation, hit a year-on-year increase of 8.5 percent in April, following jumps of 8.3 percent in March and a near 12-year high of 8.7 percent in February, the bureau said.

The CPI grew 8.1 percent in urban areas and 9.3 percent in rural areas last month, the bureau said.

Food costs, accounting for a third of the CPI basket, has been the main driver of soaring inflation growth since early last year after increasing prices of food stocks pushed up the cost of meat.

Food prices surged 22.1 percent year on year last month. Within the category, meat and poultry prices soared 47.9 percent in April.

The cost of pork, the nation's staple meat, increased 68.3 percent last month from a year ago while cooking oil prices rose 46.6 percent.

The price of vegetables also increased 13.6 percent last month from a year ago. Grain prices gained 7.4 percent in the period.

The combined CPI grew 8.2 percent from January to April, the bureau said.

The April CPI underscored the government's effort to curb inflation without triggering an economic slump. China aims to cap inflation at 4.8 percent in 2008, the same pace as last year.

The inflation surge, the biggest threat to the country's economic development as Premier Wen Jiabao said, will add more pressure on the government to prevent price increases from spreading beyond food, which is now making people's daily life harder.

There is a possibility that the country may increase interest rates, Zhou Xiaochuan, Central bank Governor, said on May 5. The benchmark one-year lending rate is at a nine-year high of 7.47 percent after six increases last year.

The central bank has ordered lenders to set aside more deposits as reserves three times this year, pushing the ratio to a record 16 percent. It also sells bills to drain cash from the financial system.

Average wages in China's urban areas jumped 18.3 percent in the first quarter from a year earlier to 6,524 yuan (US$935). Producer prices jumped 8.1 percent in April from a year earlier, the fastest pace since November 2004, the bureau announced last week.

Rising inflation also pressed the government to consider allowing faster appreciation of the yuan to cool import costs and rein in the trade surplus that is pumping money into the economy.

The yuan has climbed about 0.4 percent versus the dollar since March 31 after a 4.2 increase in the first quarter, which was the biggest quarterly jump since the end of a fixed exchange rate in 2005.

(Shanghai Daily May 12, 2008)