Shanghai :  Rising vegetable prices in China are increasing inflationary pressure and reducing the likelihood the government will ease monetary policy in the near term, according to Deutsche Bank AG.

China's State Council, or cabinet, urged local governments to increase vegetable supplies to stabilise prices, according to a statement on the government's website on Wednesday. The nation has seen large price swings in recent years and this year's floods have disrupted supplies, according to the statement.

"A State Council meeting convened specifically to discuss vegetables is extremely unusual and sends a message on how concerned the government is" about the stability of food prices and inflation, Jun Ma, Deutsche's chief economist for Greater China, said in e-mailed comments to clients yesterday.

Consumer prices may rise above 4 per cent this month, said Ma, ranked first in Institutional Investor's 2010 All-China poll. The government's full-year inflation target is 3 per cent.

Lending curbs

The benchmark Shanghai Composite Index has rallied 13 per cent from this year's low on May 7 on speculation slowing industrial output and retail sales leave policy makers room to loosen lending curbs and boost investment in coming months.

A rebound in property prices in the past fortnight also increased pressure on the government to more strictly implement its tightening policies on the real-estate industry, which will likely cap stock-market performance, Ma said.