Sat, Oct 15, 2011 - Page 10 News List

China’s inflation rate goes down, food prices steady


China’s inflation rate edged lower last month, giving Chinese leaders leeway to stimulate the economy as US and European growth slows.

Consumer prices rose 6.1 percent, down from August’s 6.2 percent, but well above the government’s 4 percent target for the year, data showed yesterday. Food price inflation held steady at August’s level of 13.4 percent.

Lower inflation will give Beijing room to stimulate the economy if needed by reversing lending curbs and other controls imposed over the past year to steer rapid growth to a more sustainable level and cool price rises. Inflation peaked at a 37-month high of 6.5 percent in July and is expected to ease further as the autumn harvest comes in.

“Inflation is in retreat,” IHS Global Insight analyst Alistair Thornton said. “Should developments in the eurozone take a turn for the worse, then it’s clear the government will start to aggressively loosen monetary policy.”

China’s economy is forecast by the World Bank to grow by a relatively robust 9.3 percent this year. However, it faces a possible impact from weak US and European demand that caused an unexpectedly sharp decline in last month’s export growth. Exports to the 27-nation EU, China’s biggest trading partner, dropped 9.7 percent from a year earlier.

China rebounded quickly from the 2008 global crisis on a flood of government spending and bank lending. However, that money coursing through the economy fueled price rises, prompting the government to clamp down on lending.

Beijing has begun to loosen some curbs, promising this week that state banks will lend more to small companies that have been hurt by a lack of credit. Some have been driven into bankruptcy and others turned to high-interest underground lenders.

Last weekend, regulators lowered state-set prices for gasoline and diesel by 3.5 percent in line with declines in global crude costs.

Inflation has been largely driven by food costs because of shortages of pork, vegetables and other basic items. The government has launched measures to increase supplies but those have been set back by summer storms that wrecked crops.

Price rises last month were driven by a 43.5 percent jump in the price of pork, a 14.2 percent increase in egg prices and a 11.9 percent increase for grain.

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