Chinese annual inflation pushed up to an 18-month high in April and property prices rose at a record clip, showing that the government still has its work cut out to keep the world's third-largest economy from boiling over.
However, a slowdown in money growth and industrial output signalled that incremental tightening measures have started to bite, justifying Beijing's cautious approach thus far to tamping down on economic activity.
But analysts said that higher interest rates and a resumption of yuan appreciation -- tightening steps that the government has so far resisted -- should be on the policy menu in coming months.
Consumer prices rose 2.8 per cent in the year to April, topping forecasts for a 2.7 per cent rise and the highest since October 2008.
A central bank adviser said that China had signalled this week that it was ready to let the yuan move more freely when it said it would manage its exchange rate "with reference to a basket of currencies".
But the comments were seen as representing the adviser's personal views and not necessarily reflective of official thinking.
The latest batch of economic data underscored why many analysts believe that Beijing will allow only faint appreciation even after it releases the yuan from its de facto dollar peg in place since mid-2008.
Inflation was driven by food prices, which rose 5.9 per cent in the year to April, while core pressures remained relatively subdued, with non-food prices up 1.3 per cent.
Although new bank lending was stronger than expected last month at 774 billion yuan ($113 billion), the broad M2 measure of money growth slowed to 21.5 per cent year on year, the slowest since early 2009.
And China just narrowly notched up a trade surplus in April, according to numbers published yesterday.
The government officially describes policy as "appropriately loose", as it has done since the height of the global financial crisis in 2008.
In practice, China has gradually normalised its monetary stance after flooding the economy with cash last year.
The People's Bank of China has raised banks' required reserves three times this year and stepped up drainage of cash via open market operations, while regulators have given banks strict orders to rein in issuance of loans.
In contrast to regional neighbours such as India, Malaysia and Australia, China has so far eschewed the blunter instrument of raising rates, not least because Beijing harbours doubts about the solidity of the global recovery and has an eye on the all-important property market.
Chinese property prices jumped 12.8 per cent in April from a year earlier, the fastest pace in the five-year history of the government's main housing market survey. Economists believe the official figures understate the extent of price rises, especially in major cities.
Surprising on the downside, industrial output dipped to 17.8 per cent year-on-year growth in April. Economists had expected a rise of 18.5 per cent.
Reuters