Inflation reached 5.1 per cent last month, a 28-month high, but the government remains set on current policy based on low yuan-driven exports. The authorities plan a ceiling on prices of essential items, aid to families and more funding for education and health care.

Beijing (AsiaNews/Agencies) – China’s inflation rate has taken off, reaching 5.1 per cent in November, a 28-month record, the National Bureau of Statistics reported on Saturday. For its part, the government announced that it would put a ceiling on basic items and cut liquidity. It refused however appreciating the yuan.

The rise in consumer prices last month set off alarm bells because it exceeded the forecast. The increase in food prices (+11.7 per cent over a year ago, up from 10.1 per cent in October) and other essential goods was particularly worrisome for the government, which is particularly averse to street protests. Social unrest is real possibility given the fact that low income families on average spend half of their income on food.

At the same time, some 81 million people in China might need special assistance in the coming winter months, especially in those areas that have suffered recent natural disasters, this according to official sources.

For the central government, speculation is to blame for rising prices. Hence, it does not plan to change economic direction, even though its export-oriented economic strategy based on an undervalued yuan is the real cause of the current jump in inflation.

In its three-day annual central economic work conference, which ended yesterday, the government worked on drafting the 12th Five-Year Plan (2011-2015), vowing to do more to quell inflation. It also reiterated that its “priority is to actively and properly handle the relations between maintaining steady and relatively fast economic growth, economic restructuring and managing inflation expectations”. The goal is to favour employment and improve the standards of living.

The above includes keeping the yuan "basically stable" at a reasonable and balanced level, the authorities said, which suggests that Beijing is ruling out any dramatic appreciation of the currency despite mounting international pressure or economists’ warnings that China is importing inflation.

China's main trade partners, the United States in particular, are pressing the world's largest exporter to speed up the appreciation of its currency to rectify trade imbalances.

Instead, China’s central bank told the country’s six largest banks to increase their reserve requirements to mop up excess cash in the economy.

The authorities also said they would take steps to improve standards of living by investing in education, employment, welfare, health and housing.

At the same time, they plan to stimulate domestic consumption to reduce reliance on exports, something they have being saying for year but have failed so far to do in any significant way.

Experts have noted that price rises are pushing wages up in a chain reaction that is fuelling inflation.

They argue that the government’s anti-inflation measures cannot quickly fix the problem, and that the danger of social unrest remains high.

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