China's inflation rose to a 37-month high in July, adding to pressure on Chinese leaders to cool living costs while keeping economic growth on track as the U.S. and European outlook worsens.
Consumer prices in the world's second-largest economy rose 6.5 percent over a year earlier, up from June's 6.4 percent, data showed Tuesday. That was driven by a 14.8 percent jump in food costs, up from June's 14.4 percent and leaving the inflation rate well above the government's 4 percent target for the year.
The jump in prices came despite a slowdown in manufacturing and other economic activity in July following repeated interest rate hikes and other curbs imposed to cool an overheated economy.
Beijing has to strike a difficult balance between stopping inflation and easing controls to support Chinese companies as U.S. and European demand weakens, said IHS Global Insight analyst Alistair Thornton.
"They're in a really tough position now," Thornton said. "If they want to start loosening (monetary policy) and buoying up growth, they could face the risk of compounding higher-than-desired inflation."
Analysts blame the inflation spike on the dual pressures of consumer demand that is outstripping food supplies and money surging through the economy from a bank lending boom that helped China ward off the 2008 global crisis.
Rising prices, especially for food, are politically dangerous for the Communist Party because they erode economic gains that underpin its claim to power.
Beijing is trying to rein in economic growth that surged to 9.5 percent in the quarter that ended in June just as the United States, Japan and other governments are struggling to shore up their own lagging economies.
Some observers had expected at least one more Chinese rate hike this year but analysts said that now looked unlikely due to uncertainty following Standard & Poor's downgrade of U.S. sovereign debt.
"This is the kind of data that should trigger (an) interest rate hike, but the turmoil in global financial markets will probably delay the action," said Wei Yao, China economist for Societe General, in a report.
A survey by HSBC Corp. released earlier showed manufacturing contracted in July for the first time this year. HSBC's purchasing managers index fell to a 29-month low of 49.3 on a 100-point scale on which numbers below 50 show activity contracting.
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Consumer prices in the world's second-largest economy rose 6.5 percent over a year earlier, up from June's 6.4 percent, data showed Tuesday. That was driven by a 14.8 percent jump in food costs, up from June's 14.4 percent and leaving the inflation rate well above the government's 4 percent target for the year.
The jump in prices came despite a slowdown in manufacturing and other economic activity in July following repeated interest rate hikes and other curbs imposed to cool an overheated economy.
Beijing has to strike a difficult balance between stopping inflation and easing controls to support Chinese companies as U.S. and European demand weakens, said IHS Global Insight analyst Alistair Thornton.
"They're in a really tough position now," Thornton said. "If they want to start loosening (monetary policy) and buoying up growth, they could face the risk of compounding higher-than-desired inflation."
Analysts blame the inflation spike on the dual pressures of consumer demand that is outstripping food supplies and money surging through the economy from a bank lending boom that helped China ward off the 2008 global crisis.
Rising prices, especially for food, are politically dangerous for the Communist Party because they erode economic gains that underpin its claim to power.
Beijing is trying to rein in economic growth that surged to 9.5 percent in the quarter that ended in June just as the United States, Japan and other governments are struggling to shore up their own lagging economies.
Some observers had expected at least one more Chinese rate hike this year but analysts said that now looked unlikely due to uncertainty following Standard & Poor's downgrade of U.S. sovereign debt.
"This is the kind of data that should trigger (an) interest rate hike, but the turmoil in global financial markets will probably delay the action," said Wei Yao, China economist for Societe General, in a report.
A survey by HSBC Corp. released earlier showed manufacturing contracted in July for the first time this year. HSBC's purchasing managers index fell to a 29-month low of 49.3 on a 100-point scale on which numbers below 50 show activity contracting.
Read more
