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Inflation fears hit China shares Inflation fears hit China shares
(about 15 hours later)
Chinese shares have fallen to their lowest level for 19 months, rattled by fears about inflation.Chinese shares have fallen to their lowest level for 19 months, rattled by fears about inflation.
Wholesale prices jumped 10% in July from a year earlier, the highest rate in 12 years, official data showed.Wholesale prices jumped 10% in July from a year earlier, the highest rate in 12 years, official data showed.
The data sent the Shanghai Composite tumbling 5.2% to close at 2,470 points, down 60% from last October's peak.The data sent the Shanghai Composite tumbling 5.2% to close at 2,470 points, down 60% from last October's peak.
Investors are concerned that rising inflation combined with the prospect of slower economic growth will hurt company profits.Investors are concerned that rising inflation combined with the prospect of slower economic growth will hurt company profits.
Margins squeezedMargins squeezed
However, China reported a rise in its trade surplus, which swelled to its highest level in eight months in July, despite the economic slowdown hitting many of its customers overseas.However, China reported a rise in its trade surplus, which swelled to its highest level in eight months in July, despite the economic slowdown hitting many of its customers overseas.
The 10% rise in China's producer price index, which measures the price of goods as they leave the factory, was up sharply from June's rate of 8.8%.The 10% rise in China's producer price index, which measures the price of goods as they leave the factory, was up sharply from June's rate of 8.8%.
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The economic hangover China could be facing
The rise was primarily due to rising energy costs, with crude oil costing 41.2% more than a year ago and a 32.6% rise in the cost of petrol.The rise was primarily due to rising energy costs, with crude oil costing 41.2% more than a year ago and a 32.6% rise in the cost of petrol.
"Producers' profit margins are being squeezed sharply and even though tough market competition will delay the pass-through to retail prices, it will happen eventually," said Xing Zhiqiang, an economist at China International Corp."Producers' profit margins are being squeezed sharply and even though tough market competition will delay the pass-through to retail prices, it will happen eventually," said Xing Zhiqiang, an economist at China International Corp.