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Shanghai posts faster rise in inflation
March-15-2011

Consumer prices in Shanghai grew faster in February but still lower than the national average, the Shanghai Statistics Bureau said Monday.

The Consumer Price Index, the main gauge of inflation, was up 4.7 percent annually last month, compared to January's 4.3 percent and December's 4.5 percent. It compared with China's average of 4.9 percent.

Food costs soared 10.2 percent in February, remaining a major force to drive up overall prices despite its lesser weighting.

The revised method of calculating the CPI, introduced in January, cut the weighting of food in the index and increased the weighting of residency costs (mainly housing).

Residency costs in February rose 5.9 percent, the bureau said.

"Shanghai's inflationary pressure is heavy," said Wang Zehua, an analyst at the bureau. "It is a tough battle to rein in prices - food costs in particular - and reduce inflation expectation."

Wang had anticipated consumer prices would grow faster in February due to dearer food costs amid the Spring Festival holiday, more expensive commodity prices globally and growing production costs.

Shanghai Mayor Han Zheng said last week the city will be able to keep inflation under 4 percent this year as required by the central government but reckoned it would be an "arduous task."

The city has carried out policies since the middle of last year, including streamlining the distribution process to cut costs, providing subsidies for producers to boost supply, and enhancing regulations to punish speculators who distorted prices.

Apart from temporary administrative interventions, city officials are considering the introduction of a price regulation fund, which may use the government fiscal fund to stabilize price increases.

Xu Weihong, a Guodu Securities Co analyst, said it was important to ease inflation expectation.

"People nowadays complain a lot about price jumps in daily necessities," Xu said. "If consumers are pessimistic, it will sap domestic demand and harm the overall economy."

In the first two months, Shanghai's consumer prices rose 4.5 percent, well above the yearly target.