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Thursday, June 12, 2008

China Inflation May 2008

China's inflation rate slowed to 7.7 percent in May 8.5 percent in April, the statistics bureau said. Aprils number was not far from February's twelve year high of 8.7%.

However China's money-supply growth accelerated to the fastest pace in four months in May, adding pressure on the central bank to prevent cash inflows from fueling inflation. M2, the broadest measure, rose 18.1 percent from a year earlier to 43.6 trillion yuan ($6.3 trillion), according to the People's Bank of China today, after gaining 16.9 percent in April.

The trade surplus, foreign direct investment and inflows of capital from investors betting on currency gains are flooding the world's fastest-growing major economy with cash. The People's Bank of China earlier this week ordered lenders to increase the proportion of deposits that they set aside as reserves to a record 17.5 percent (as of June 25) in an attempt to slow down monetary growth.

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