Weak dollar could push up inflation

A steadily weakening in the US dollar was a focus of the just-closed Sino-US Strategic Economic Dialogue. The head of China's Central Bank, Zhou Xiaochuan, said this could be one of the many factors pushing up consumer prices in developing countries.

Zhou Xiaochuan said raw material prices have been hovering at high levels since last year, putting pressure on China's factory gate prices, which tend to have a knock-on effect on consumer prices.

Zhou said, "The weak dollar can push up prices of raw materials such as crude oil. This has led to inflation in China when the country imports these goods. Many developing countries are feeling the pinch of rising inflation."

Zhou then stressed that there were many reasons for inflation, and that a weak US dollar is just one of them. The US dollar has been weak since the start of sub-prime mortgage crisis last year. To maintain the dollar's status as the world's main currency, US treasury secretary Henry Paulson said the government might intervene the market.

A stronger yuan against a weaker dollar has also had its effect on Chinese enterprises. In past years, the growth rate of US imports from China has been much higher than that from any other single country in the world. But this year has seen significant change, with US statistics showing imports from China only rising 1.8 percent year on year for the first quarter.