China’s chronically high inflation edged down last month, but stayed relatively strong, limiting Beijing’s ability to stimulate its slowing economy.
Consumer prices overall rose 4.1 percent, down from the previous month’s 4.2 percent, but still above the year’s official 4 percent target, data showed yesterday. Inflation in food costs, which account for up to half of monthly spending for poor families, accelerated to 9.1 percent from November’s 8.8 percent.
“Inflation is coming down, but not as fast as the government would have liked,” IHS Global Insight analyst Alistair Thornton said.
“The authorities are constrained in their ability to aggressively loosen monetary policy to revive growth,” he added.
Beijing tightened lending and investment curbs through early last year to cool an overheated economy and inflation that hit a 37-month high of 6.5 percent in July. However, it reversed course later in the year as global demand slumped.
The central bank promised pro-growth policies for entrepreneurs following a government planning conference last weekend. Private companies that produce most of China’s new jobs and wealth were hit hard by the export decline and clampdown on lending, forcing layoffs and raising the threat of unrest.
China’s rapid economic growth slowed to 9.1 percent in the three months ending in September from the previous quarter’s 9.6 percent. However, the drop in export demand prompted fears that China’s expansion might slow too abruptly.
Industrial indicators show manufacturing and export orders contracted in November and last month. China’s own imports of oil, iron ore and other goods showed an unexpectedly sharp decline last month to 11.8 percent, barely half the previous monthly’s level.
Analysts blame the price surge on strong consumer demand and the flood of money from Beijing’s multibillion-US dollar stimulus that helped China rebound quickly from the 2008 global economic crisis.
The rise in Chinese food costs last month was driven by a 21.3 percent jump in the price of pork, the country’s staple meat, and a 6.9 percent jump in grain prices.
“An increase in prices in month-on-month terms, which seems to be due to food prices, will give the government pause before reining in its efforts in keeping consumer prices in check,” Moody’s Analytics said in a report.
JPMorgan economists said they expect inflation to decline to below 3 percent by the middle of this year and for monetary policy to be “biased towards moderate easing.”
The World Bank and private sector analysts have said China and other developing countries that have seen rapid economic growth in recent years are likely to face a rise in their long-term inflation.
For the full year, the government said China’s consumer prices rose 5.4 percent.
“Inflation remained above the targeted 4 percent level every single month of the year,” Thornton said. “That is going to remain a problem.”