US clashes with China over inflation surge
Published 12/11/2010 | 05:00
ROCKETING food prices have catapulted Chinese inflation to its highest level in two years, widening the gulf between Beijing and Washington that has emerged so publicly as the G20 summit in Seoul flails irritably for consensus.
The 4.4pc year-on-year surge in monthly inflation was higher than even the most bullish economists' forecasts and took the country's consumer price index (CPI) to a height not seen since the food crisis of mid-2008 gripped global commodity markets.
The US is expected to exploit the surprise inflationary surge in its drive to force Beijing to let its currency climb against the dollar.
But China will point to the same leap to support its own condemnation of US policy and the widely held expectation that the liquidity created by the Federal Reserve has already begun to translate into asset price bubbles in emerging markets.
Chinese property prices rose 8.6pc in October from a year earlier, a report showed yesterday.
The inflation figures, which again highlight the widening imbalances in the world economy, were released just hours before the G20 leaders were due to sit down for their first round-table discussion -- an event for which even the preparatory meetings have proved ill-tempered and explosive.
At stake, say officials, is the extent to which the G20 can prevent the world descending into a destructive phase of trade friction, protectionism and currency wars. Several of the leaders indicated to reporters last night that it was far from clear that any real agreement could be reached in the next 24 hours.
The spat over exchange-rate policy is the most divisive of the G20 rows. Both Washington and Beijing believe that the other must do more to address the sort of widening imbalances symbolised by the $28bn (€20.5bn) trade surplus that China revealed. The yuan rose yesterday to a 17-year high against the dollar, concluding a 0.7pc rise this week alone, but American negotiators believe the pace should be much faster.
Chinese president Hu Jintao said that US policy should "take into account the interests of emerging market countries and developing countries".