China’s inflation accelerated in May to the quickest pace in 19 months, highlighting overheating risks in the fastest-growing major economy.
Today’s data, combined with surging exports and near- record property-price gains, underscore U.S. arguments for a more flexible yuan ahead of a Group of 20 nations meeting in Toronto in two weeks’ time. U.S. Treasury Secretary Timothy F. Geithner told the Senate Finance Committee yesterday that a move could redress global economic “distortions” and help China cool prices.
“China’s economy is still in a cycle towards overheating and the government should step up measures to curb inflation expectations,” Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd., said before today’s release. “This weekend or this period of time in general before the G-20 summit would be an excellent time” for China to widen the yuan’s trading band, Liu said.