Inflation in China takes sheen of deposits

Inflation in China takes sheen of depositsYesterday's inflation data of China is a cause for concern for not just policymakers but also for the Chinese savers who prefer to park their money in bank deposits.

Consumer prices rose by more-than-forecast 2.7 per cent in February, the most in 16 months, and compared to 1.5 per cent in January, the statistics bureau said. The increase in CPI exceeds 1-year deposit rate of 2.25 per cent, which in a way erodes purchasing power and could spur purchases of property and stocks and fuel asset-price pressures.

The jump in the inflation rate last month "will increase the social and political pressure for a rate hike in the near term," said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong.

Chinese Premier Wen Jiabao is aiming for a full-year inflation of around 3 per cent after country's banks inundated the financial system with money to stimulate the economy after a brief period of slumber. The data released yesterday also showed that industrial output rose 20.7 per cent in the Jan-Feb of 2010, the most in more than half a decade.