By staff reporter Wang Zhen

It's still far too early to claim success in the battle against China's soaring inflation. China's Consumer Price Index (CPI), a mark of inflation, came in at 8.5 percent year on year in April, higher than the March reading of 8.3 percent and market consensus of 8.2 percent.

According to the National Bureau of Statistics, the CPI in urban areas reached 8.1 percent, and 9.1 percent in rural areas. The continued elevation of the CPI reflects the impact of higher food and consumer products prices.

Food prices were up 22.1 percent in April, down 0.1 percent from March. Consumer product prices were up 10.6 percent, as reflected by Production Price Index of 8.1 percent in April.

Liang Hong, chief China economist at Goldman Sachs said in a report May 12 that April's CPI inflation fit in line with their research group's expectations. Yet, April's CPI was higher than anticipation from the market and many institutions including JP Morgan.

JP Morgan highlighted the exchange rate as a contributor to a continued high CPI. In the first quarter, China allowed the RMB to appreciate at an atypically fast rate of 4.2 percent.

Also, higher labor cost, commodity prices and energy costs have all contributed to rising prices in April. Non-food prices are up 1.8 percent. JP Morgan noted that “though non-food inflation has remained at low levels, it shows signs of creeping up.”

According to the National Bureau of Statistics, authorities have said that the state will closely monitor the CPI trend in the near future. Beijing also promised on several occasions that the state will work hard to moderate consumer prices and thereby constrain inflation.

Goldman Sachs stated in its report that “as underlying inflationary pressures remain undiminished, it is vital for the authorities to keep its tightening policy stance.”

GDP growth for the first quarter came in at a reassuring 10.6 percent but worries of an overheating  Chinese economy remain.