Dangerous medicine

10 March 2010 By John Foley Follow @johnsfoley

If the rate could persist at February’s 2.7 percent, China and the world might be better off. Rising prices and wages spur consumption and effectively revalue the currency. But it will be hard to keep inflation tame while monetary policy stays loose in an overheating economy.

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China's consumer price index rose by 2.7 percent in February, compared with the previous year. Food prices, which make up around a third of the CPI basket, rose 6.2 percent year on year, and nonfood prices rose 1 percent.

Producer prices of manufactured goods rose by 5.4 percent, year on year, compared with a 4.3 percent rise in January.

Industrial production for January and February rose 20.7 percent compared with the same period in 2009, reaching a record level. Fixed asset growth rose 20.5 percent, while nominal retail sales increased 17.9 percent.

Money growth figures were also released, showing a 25 percent increase in the M2 measure of money for February, year on year. The growth in loans outstanding from banks was 27.2 percent year on year.

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Dangerous medicine

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