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China's August Inflation Rate Stays at Seven-Year High - 2004-09-20


China's inflation rate in August sustained a seven-year high, while U.S. manufacturers have reached an agreement with Beijing on new trade initiatives.

Rising food costs helped keep China's inflation rate at a seven-year high last month. The country's consumer-price index rose 5.3 percent in August from a year ago, unchanged from July's increase.

The Chinese government has clamped down on lending to several industries to cool an investment boom that adds to inflation. But some economists say China may soon take tougher measures.

Kingston Lee, head of Hong Kong and China Research at ING Financial Markets, says he expects China's central bank will soon raise interest rates for the first time in almost a decade.

"The inflation pressure, there's too much growth in some of the investment side," says Mr. Lee. "I won't be surprised they may just raise a little bit."

The U.S. National Association of Manufacturers has reached an agreement with Chinese officials on initiatives aimed at boosting U.S. exports to China.

The initiatives focus on helping smaller U.S. businesses tap China's market, and include information exchanges, joint activities and facilitation of business contacts. During the trade talks with China, the association and U.S. officials also raised concerns about China's undervalued currency and widespread counterfeiting of U.S. products.

Grant Aldonas, U.S. under secretary of Commerce, says counterfeiting in China has been an obstacle to doing business in the country.

"The barrier is an intellectual property violation," he says. "For so many American manufacturers, solving problems like intellectual property help in resolving the market access issues they're facing."

In the Philippines, capital investment soared almost 500 percent to about $3 billion in the first seven months of 2004, compared with the same period last year. About 40,000 jobs were created during this period.

India's inflation rate fell more than half a percentage point to 7.8 percent in the week ended September fourth, easing pressure for interest rate hikes.

The decline, the first in eight weeks, has been attributed to falling oilseed and poultry prices.

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