China Premier Wen says planning steps to fight inflation

BEIJING, (AFP) - Premier Wen Jiabao said China was drafting measures to contain rising prices in the latest sign of official concern after inflation grew at its fastest pace in two years.

“Great attention should be paid to market supply and demand and prices because they are related to the public’s basic interests,” Wen was quoted as saying in a statement on the central government’s website late Tuesday.

“The State Council (cabinet) is formulating measures to curb the overly fast rises of prices.”It did not specify the measures to be taken.

The statement said Wen made the comments during a visit to a supermarket last Thursday in the southern city of Guangzhou.

The nation’s consumer price index rose 4.4 percent year-on-year in October, compared with 3.6 percent in September, the National Bureau of Statistics has said, much higher than the government’s full-year target of three percent.

It was the fastest pace since September 2008, after which growth slowed amid the global financial crisis. Inflation was mainly driven by soaring food prices and other costs such as rising rents.

Wen also “urged local officials to try all ways to ensure smooth supply channels and market supply, strengthen supervision and maintain market order,” the statement said.

Vice Premier Li Keqiang, who is widely tipped to succeed Wen in 2013, also called for efforts to “manage inflation expectations”, the state-run Xinhua news agency reported Wednesday.

Inflation fears, always an official concern for China’s leader who are worried about its potential to spark public unrest, have been further fuelled by the US Federal Reserve’s decision to pump money into the American economy.

Chinese officials have warned the US move could cause damaging fund flows into emerging economies such as China and trigger inflation.

The central bank announced last month its first interest rate hike since 2007. It also has raised the amount of money banks must keep in reserve on four occasions this year to curb rapid growth in lending.

China’s benchmark Shanghai Composite Index has lost more than eight percent in the past three trading days on fears over inflation and possible further government steps to cool the economy.