China’s economy faces continuing inflationary pressures as the government endeavours to deliver stable and rapid economic growth, a government report said.

“As factors driving price increase are still active significant pressure to push up the prices will remain,” said the report from China to the World Trade Organisation (WTO).
The report, part of China’s regular trade policy review with the WTO, was published five days before China announced that annual consumer price inflation had accelerated to 8.5 per cent in April, close to February’s near 12-year high of 8.7 per cent.
Earlier, Premier Wen Jiabao said inflation remained China’s most pressing economic problem even though the earthquake that devastated Sichuan had created new economic uncertainties.
The Chinese report reiterated Beijing’s determination to rebalance the economy by boosting consumer demand rather than relying on investment and exports to power growth, and to draw on agriculture and services as well as manufacturing.
The report noted that the yuan had appreciated by 13.3 per cent against the dollar between July 2005, when China introduced a floating exchange rate, and the end of 2007. Appreciation has accelerated this year, it said.
But it gave no insights into future exchange rate policy.
Critics of China in the United States and Europe have said Beijing keeps the yuan artificially low to encourage exports.
The WTO said China would benefit from a more flexible foreign exchange regime, allowing it to use monetary policy more effectively to tackle inflation.
“A more flexible exchange rate could enable China to operate a more independent monetary policy, which would be better suited to ensuring a low and stable rate of inflation,” it said in a trade policy review.