BEIJING, China – CHINA’S inflation accelerated in April, triggering a sell-off in Chinese stocks yesterday on fears of overheating and a possible credit clampdown by Beijing that might slow the country’s economic recovery.

April consumer prices rose 2.8 per cent from a year earlier, below Beijing’s full-year target of three per cent but up 0.4 percentage points from March, the National Bureau of Statistics said. Food prices jumped 5.9 per cent, up from March’s 5.2 per cent rate.

“Growth in the consumer price index is still mild compared with our economic recovery and inflation in other countries,” said a bureau spokesman, Sheng Laiyun. “But we are facing big inflation pressures in the short term.”

Foreign companies and investors are watching Chinese inflation because any moves to cool prices might slow stimulus-fuelled economic growth that surged to 11.9 per cent in the first quarter. That could hurt the global recovery if it weakens demand for foreign iron ore and other imports.

Economists said inflation is still relatively low and Beijing was unlikely to react with an immediate rate hike at a time when the global outlook is still uncertain amid the European debt crisis.

“Overall, we don’t see this as threatening yet for the economy,” said Standard Chartered economist Jinny Yan. “What they will do is observe external markets for a while longer before deciding what to do.”

But the data spooked investors and China’s main stock index tumbled 1.9 per cent to close at its lowest level in 11 months.

Chinese investors have been jittery over the past two weeks about the potential for the government to tighten access to credit following repeated pledges by authorities to cool a surge in housing prices.

In addition, speculative buying and selling are common in China, making markets especially sensitive to rumors or abrupt shifts in investor sentiment. With so little information available, markets tend to react strongly to any development.

“Investors worry there is a chance of the economy overheating, and that might trigger more government policy tightening,” said Huang Xiangbin, an analyst for Cinda Securities in Beijing.

The government worries about a surge in housing and other asset prices and is trying to use lending curbs to prevent a dangerous bubble while avoiding an across-the-board rate hike that might slow growth.

Housing prices in 70 Chinese cities jumped 12.8 per cent in April despite the controls, the statistics bureau said.

Bank lending rose to 774 billion yuan (US$113 billion), up from March’s 510.7 billion yuan (US$75 billion), the central bank announced.

Wholesale prices climbed 6.8 per cent in April from a year earlier, a 0.9 per cent increase over March’s rise. That can lead to a rise in consumer prices down the line as retailers pass on higher costs.

Inflation was driven by cold weather that hurt the spring harvest and high prices for fuel and imported commodities, said Sheng, the statistics bureau spokesman. He said the biggest rises in April food costs were 14.9 per cent for vegetables and 16.4 per cent for fruit.

Other data yesterday showed China’s economic recovery still on track.

April retail sales rose 18.5 per cent from a year earlier, up 0.5 per cent from March’s growth rate, while industrial output increased by 18.8 per cent. Investment in factories and other fixed assets rose 26.1 per cent in the January-to-April period over a year earlier.