China producer price index up 8.1 pct

By ELAINE KURTENBACH AP Business Writer

SHANGHAI, China (AP) - China's producer price index, a key indicator of inflation, rose 8.1 percent in April over the same month a year earlier, the government reported Friday, as a top economic official sought new controls to cool rising prices.

Greater-than-expected cost increases for raw materials and industrial inputs suggests that recent state media reports of a rapid moderation in the consumer price index may have been premature.

"So far this year, China's economy has continued to grow at a fast pace," Vice Premier Wang Qishan told a financial conference in Shanghai on Friday. "However, the economy is also facing some problems, mainly reflected in relatively high consumer prices and fixed-asset investment."

Authorities must prevent "fast money supply growth from becoming excessive and structural price increases from escalating to a severe overall inflation," Wang said.

Wang, the former Beijing mayor who recently took charge of China's financial sector, also called for tighter controls on flows of capital across borders - reflecting Beijing's concern over so-called "hot money" or speculative investments.

The government has long pointed to excessive investment in "fixed assets" such as property development and factory equipment as a strain on the economy that could trigger a financial crisis.

But surging consumer prices, driven largely by rising food costs, have drawn even greater concern. The communist leadership fears that such soaring prices could trigger widespread unrest.

Energy prices were a major factor behind April's 8.1 percent surge in the producer price index over the same month a year earlier, up from an 8.0 percent rise in March, the National Bureau of Statistics reported.

Prices for raw materials, fuel and power rose 11.8 percent. Crude oil registered the largest gain, surging 37.9 percent from a year ago. Raw coal was 20.9 percent more costly, while steel prices jumped 25 percent to 41 percent, the bureau said.

China's retail consumer prices rose 8.3 percent in March, a slight decline from February's 8.7 percent gain, which was the highest inflation rate in nearly 12 years. Earlier this week, comments by officials suggesting a further drop-off in inflation rate prompted a surge in share prices.

Investors reacted swiftly to Friday's news. The benchmark Shanghai Composite Index dipped by as much as 2.9 percent but recovered some lost ground to close at 3,613.49, down 1.2 percent from Thursday.