China’s economy is likely to slow further to 6.5 percent in the first quarter, intensifying deflationary pressure, a government think tank said in a report published yesterday.
First-quarter economic growth will be slower than the 6.8 percent seen in the fourth quarter of last year, the State Information Center said in a report published in the official China Securities Journal.
The government think tank also forecast the consumer price index (CPI), the main gauge of inflation, would fall 1 percent in the first quarter, compared with a rise of 1 percent in January.
China has set a full-year inflation target of 4 percent for this year.
The last time the monthly CPI reading fell into negative territory was six years ago, when it slipped 0.4 percent in December 2002, previous government data showed.
Producer prices, which measure trends at the wholesale level, may drop 5 percent in the first quarter, the think tank said. The producer price index fell 3.3 percent in January.
Sustained price drops are alarming because they often cause consumers to delay major purchases in anticipation of still cheaper goods in the future, putting even more downward pressure on economic growth and prices.
In a separate report, the newspaper quoted central bank Vice Governor Yi Gang (易綱) as saying consumer prices may see year-on-year declines in some months this year.
But Yi said China was not seeing a classic deflationary spiral because the economy was still expanding and “the central bank has sufficient monetary tools to address deflation” and curb further price drops.
The think tank also said exports, a pillar of the world’s third-largest economy, were likely to fall 9 percent in the first quarter to US$278.4 billion, while imports would drop 25 percent to US$198.4 billion.
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