Beijing's policy settings may not be such a big boob after all

At first sight it looks like Beijing's economic chieftains may have made a major blunder last month when they switched their policy priority away from fighting inflation and towards supporting export growth.

A quick look at data for July released yesterday suggests that while the country's export sector remains in rude health, rising prices pose a greater economic threat than at any time during the past dozen years.

Trade figures for last month published by China's customs bureau confounded analysts' expectations, showing that exports increased a robust 26.9 per cent compared with July last year.

Most forecasters, mindful of stories about shuttered factories in southern China and warnings of softening demand in the United States and Europe - China's biggest export markets - had predicted a further deterioration following June's anaemic 17.2 per cent growth.

Instead exports rebounded vigorously, with the country's monthly trade surplus widening to levels not seen since the end of last year. On last month's data at least, China's exporters appear not nearly as sickly as many observers had believed.

No one was celebrating, however, because another batch of figures released yesterday showed that China's wholesale inflation rate climbed to double digits last month, the highest level seen since the National Bureau of Statistics began compiling the data in 1996.