Soaring pork prices have seemingly already alerted the country to looming inflationary pressure. A 3.4-percent growth in the consumer price index (CPI) in May, the highest monthly rise in more than two years, surprised few.

Yesterday the Chinese stock market shrugged off the new CPI figure to continue rebounding from a panic sell-off triggered by a tripling of the stock stamp duty at the end of last month.

However, the resilience the stock market demonstrates in the face of such mounting inflationary pressure does not mean the nation's leaders can ignore the rising CPI.

Policymakers who are busy with macroeconomic controls to cool the sizzling Chinese economy should respond swiftly with all needed measures to check further consumer price hikes.

The latest data from the National Bureau of Statistics show increased food prices remain the leading driver of inflation. Food prices rose 8.3 percent from May 2006. Just last month, meat and poultry prices rose 26.5 percent and egg prices rose 37.1 percent.

The newly released figure makes May the third straight month that saw the CPI move above the central bank's comfort zone of 3 percent.

According to the statistical bureau, last month's rise in consumer prices was higher in the rural regions at 3.9 percent, compared with 3.1 percent in urban areas. If the countryside is left to bear the brunt of soaring prices, national efforts to narrow the income gap between urban and rural areas can hardly be successful.

Another negative impact of the jump in the CPI is that it sends banks' effective deposit rates deeper into negative territory. That will make it more difficult for the authorities to prevent asset bubbles as savings are moved into the stock market.

Some observers argue that an expected rise in the prices of agricultural products does not necessarily make the case for an interest rate hike. As non-food items rose only 1.0 percent in May, they argue that policymakers can wait and see before raising interest rates.

Yet, with the national economy growing at 11 percent so far this year, policymakers may need to take measures sooner rather than later to fight inflation.

(China Daily June 13, 2007)