The government is targeting inflation of 3.0 percent for the whole year.

Pressures in China to raise the prices of goods were gaining traction, according to the report by the price monitoring center of the National Development and Reform Commission that was published in the official China Securities Journal. “Manufacturers have no choice but to jack up the prices of products to offset higher costs from upstream,” the report said.

Strong growth in incomes and the booming domestic A-share market, which has tripled in value since early 2006, were also fuelling inflationary pressures, it said.

“Rapid growth in residents’ incomes and wealth has made it possible for consumption to grow rapidly. This will result in widespread price growth of downstream products and could, in turn, prompt a significant rise in overall price levels.”

The report came one day after central bank governor Zhou Xiaochuan said Beijing may take more steps to cool the economy by raising interest rates or the amount that banks must hold in reserve rather than lend out.

The government has already raised interest rates three times in just over a year to rein in a liquidity-fuelled investment boom, which has prompted fears that economic boom could turn to bust.

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