BEIJING—The rise in prices of housing and consumer goods in China accelerated in April, official data showed on Tuesday, signaling that containing inflation and asset bubbles remains a challenge even as the nation's economic growth moderates.
Average urban property prices jumped 12.8% from a year earlier in April, accelerating from March's 11.7% rise, the National Bureau of Statistics said Tuesday, marking the fastest increase since the data began to be compiled five years ago. Consumer-price inflation also picked up to 2.8% in April from 2.4% in March, the bureau said, though indicators of manufacturing activity and capital spending slowed somewhat.
Having achieved a strong recovery to double-digit economic growth rates, China's leadership has been gradually pulling back from the stimulus policies launched during the depths of the crisis. Policymakers have repeatedly sounded the alarm over the risks of accelerating inflation and a bubble in the housing market, but have been cautious in changing course lest they derail the expansion in one of the fastest-growing corners of the world economy.
The latest data are unlikely to trigger immediate additional policy changes, economists said. Consumer-price inflation remains below the government's 3.0% target for the full year, and officials are likely to want to gauge the impact of the most recent measures, they said. The government announced a package of measures to cool down the property market on April 15, and at the beginning of May ordered banks to hold more deposits on reserve.
"The housing tightening and reserve-ratio hike have reduced the chances of an imminent hike in interest rates in the near future," said Standard Chartered economist Jinny Yan. But the fact that interest rates are negative after accounting for inflation, and that raw-material prices are rising and may eventually be passed on to consumers, "are all important reasons to begin hiking interest rates," she said. China has left its benchmark interest rates unchanged since December 2008.
The effects of government tightening measures taken so far were evident in industrial output, the main indicator of manufacturing activity, whose growth slowed to 17.8% from a year earlier in April from 18.1% in March. The slowdown in government stimulus was also reflected in fixed-asset investment, which measures capital spending on public-works projects and company facilities. Such investment rose 26.1% in the January-April period from a year earlier, down slightly from the 26.4% growth in the January-March period.
Some analysts, however, noted that both indicators are still running at relatively high levels. "With mounting inflation pressure and still excessive lending growth, it is hard to be convinced that China's overheating risk has been meaningfully eased, though industrial production and urban fixed-asset investment slowed slightly," said Qu Hongbin, economist for HSBC.
The real-estate sector also continues to boom. Property sales for April were down slightly from March's level but remained 27.5% higher than a year earlier, according to figures from the statistics bureau. And construction starts and real-estate investment both continued to expand rapidly in April.
But the data do not capture the full effect of property tightening measures adopted in mid-April, when the central government raised the minimum down payment on second homes to 50% from 40%, told banks they could decline mortgage applications for third homes and increased the supply of land for building low-cost housing. Some cities, such as Beijing and Qingdao, have since announced even more stringent policies.
Officials insist everything is under control. Sheng Laiyun, spokesman for China's statistics bureau, said at a news conference Tuesday that the effects of those measures on property investment and prices would show up in the future. He also said broader price pressures could be contained despite rising global commodities prices. "It is still possible to control CPI growth within 3% in 2010," Mr. Sheng said.
China has delivered most of its economic stimulus through the state-controlled banking system, so moving bank lending back to a more normal pace is one of the key challenges of cooling down the economy. The central bank said separately Tuesday that financial institutions made 774 billion yuan worth of new local-currency loans in April, up from 510.7 billion yuan in March and about 30% more than in the same month last year.
Chinese regulators guide banks' lending on a quarterly basis, so it is not unusual for new loans to rise in the first month of a new quarter. But new lending was still larger than most economists expected, and growth in outstanding loans picked up to 22% in April from 21.8% in March, the first acceleration in five months.
