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Tue, Feb 22, 2005 - Page 12 News List

China data shows eased growth rate

ECONOMIC OUTLOOK Reduced expansion in both producer prices and industrial output seems to indicate that the country's economy is slowing down

AFP , BEIJING

The rate of increase in Chinese producer prices moderated last month, the government said yesterday, adding to evidence that Asia's second-largest economy may have seen a slowdown since early this year.

Producer or factory gate prices rose 5.8 percent in January from a year earlier, compared with a 7.1 percent increase in December, the National Bureau of Statistics reported.

"There's no denying that the trend is down but it has to be, otherwise it would be a repetition of last year's overheating," said Chen Xingdong, who is the chief China economist with BNP Paribas Peregrine Securities in Beijing.

"What we're seeing is a slowdown to more sustainable growth rates. If growth remained as high as last year, it would be a disaster," he said.

Producer prices are often seen as a more reliable indicator of inflation trends than consumer prices, which are skewed by a series of price controls still in place in China.

Statistics published so far for last month all appear to indicate that the Chinese economy is moving along at a more moderate pace after growth reached an eight-year high of 9.5 percent last year.

industrial output

Annual growth in industrial output declined abruptly last month to 8.9 percent from 14.4 percent in December, data released last week showed.

Foreign direct investment last month increased 10.7 percent from a year earlier, compared with a 13.3 percent increase for all of last year, the commerce ministry reported over the weekend.

The Chinese government has worked hard for at least a year to slow the economy in order to eradicate bottlenecks in energy and transportation and keep inflation in check.

too soon to tell

The jury is still out on the significance of the January numbers as economists warn against basing too sweeping conclusions on statistics from just one single month.

January figures

* Producer prices rose 5.8 percent from the previous year, compared with a 7.1 percent increase in December

* Annual growth in industrial output fell to 8.9 percent from 14.4 percent in December

* Foreign direct investment increased 10 percent over the previous year, compared with a 13.3 percent increase for all of last year

* Policy implications could include a slowdown in interest rate hikes


However, in terms of policy consequences, the government may decide to go slow on further interest rate hikes in light of the new figures, analysts said.

The central bank yesterday indicated its monetary tightening was not intended to cause all kinds of fund flows to dry up, suggesting it wanted to make it easier for small companies, which are mostly private, to access financing.

"We should promote the development of small loans to solve the problems faced by small enterprises and individuals seeking financing," deputy central bank governor Wu Xiaoling (吳曉靈) said in remarks posted on the bank's Web site.

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