China's inflation and export growth slow

AFTER MONTHS of strong increases, China’s inflation weakened to the slowest pace since June 2007 and export growth cooled, easing pressure over rising prices in the world’s fourth-largest economy.

Consumer prices rose 4.9 per cent in August from a year earlier, which was lower than economists had expected, following a rise of 6.3 per cent in July, 7.1 per cent in June and 7.7 per cent in May, the National Bureau of Statistics said yesterday.

Data from the customs bureau showed that exports rose 21.1 per cent in August, down from July’s 26.9 per cent gain.

“The continuous decline of the consumer price index (CPI) is a positive sign as it shows that the government’s measures to ease inflationary pressures were effective,” Yao Jingyuan, chief economist with the bureau, told state media. Mr Yao attributed the decline to falling food prices.

Food prices make up over onethird of the CPI calculation. They rose 10.3 per cent in August, 4.1 percentage points lower than July. Meat prices rose 8 per cent, down eight percentage points on July. The price of pork, which was one of the fastest rising food costs, increased by just one per cent.

Other vital foodstuffs include cooking oil, which jumped 23 per cent, vegetable prices were down 0.5 per cent, fish and seafood rose 16.4 per cent while grains rose 8 per cent.

The inflation data gave stocks a boost on hopes of tax cuts, a weaker yuan and an easing of lending restrictions imposed to stop the economy from overheating.

Economist Wang Xiaoguang said consumer-price increases had peaked as economic growth slowed and dampened demand.

“The overall slowdown of the Chinese economy has become a trend, more than a sign,” Mr Wang told news agency Xinhua.

Meanwhile, China’s producer prices climbed 10.1 per cent, the fastest pace since at least 1996, after rising 10 per cent in July, yesterday’s data showed.

Mr Wang said that as the demand continued to ease, producer-price index growth would also likely drop to below 10 per cent in September or October.

Chinese central bank governor Zhou Xiaochuan said earlier this week in Basel that inflation had slowed. “But we can’t relax as the rate may rebound,” Mr Zhou said.

Inflation across Asia is expected to peak in the fourth quarter and fall “sharply” in 2009 as oil prices decline and growth slows.

China’s economy expanded 10.1 per cent in the second quarter. The pace of growth remains the fastest of the world’s 20 biggest economies.