Oct 17

China Watch Blog has learnt that China’s consumer price index, the main gauge of inflation, grew 1.9 percent year-on-year in September, the National Bureau of Statistics announced on Monday.

The inflation eased from 2 percent registered in August. On a month-on-month basis, September’s CPI grew 0.3 percent from the previous month, according to the data released by the NBS.

Food prices, which account for nearly one-third of the weighting in the calculation of China’s CPI, rose 2.5 percent last month from one year earlier, which was down from the 3.4-percent increase in August.

China’s producer price index, which measures inflation at wholesale level, dropped 3.6 percent year-on-year in September. It marked the seventh straight month of decline after the PPI dropped in March for the first time since December 2009.

In the first nine months, the CPI grew 2.8 percent year-on-year on average, which further declined from the 3.3-percent rise in the first half of the year.

Xu Lianzhong, director of the Analysis and Prediction Office of the National Development and Reform Commission, predicted that the CPI was not likely to see a significant rebound in the remainder of the year.

Analysts also said that the country is poised to meet its target of keeping inflation under 4 percent for the full year.

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Jun 10

China Watch Blog has learnt that China’s consumer prices rose at the slowest pace in two years in May, brushing off concerns of inflation and suggesting the reason behind recent government’s decision of easing policies.

Consumer Price Index, the main gauge of inflation, expanded 3 percent from a year earlier last month, the National Bureau of Statistics said this morning.

It compared with the pace of 3.4 percent in April and previous market estimation of 3.2 percent.

Food costs, which make up nearly one third in the basket, increased 6.4 percent in May, less than 7 percent a month earlier.

Producer Price Index, the factory-gate yardstick of inflation and a harbinger of future consumer prices, dropped 1.4 percent last month, extending the loss stream for a third month and deepening from April’s 0.7 percent fall.

“The weaker-than-expected data confirms that inflation is no longer the top priority,” said Li Maoyu, an analyst at Changjiang Securities Co. “The slower growth pace of consumer prices is a reflection of weakening domestic demand, and may invite policy-makers to launch more supporting measures.”

China’s gross domestic product expanded 8.1 percent year on year in the first quarter, the slowest in nearly three years and stoking fears of a hard landing in the world’s second-largest economy.

To support growth, China has rolled out a set of stimulus measures including subsidies for consumption of energy-efficient products, expansion of private investment in previously state-dominant sectors and faster approval of new investment projects.

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May 15

China Watch Blog reports that India’s inflation unexpectedly accelerated in April to over 7% as food bills soared, data showed on Monday, diminishing chances of swift interest rate cuts to boost a stumbling economy.

The closely watched Wholesale Price Index rose to 7.23% in April from the same month a year ago with food prices climbing more than 10 percent. Inflation stood at 6.89% in March.

The data was the latest grim reminder that Asia’s third-largest economy is facing trouble after figures last week showed industrial output shrank by a surprise 3.5% in March due to weak domestic demand and falling exports.

The inflation number, which far outpaced market expectations of a 6.7% rise, “makes for extremely gloomy reading,” said Credit Suisse economist Robert Prior-Wandesforde.

“India’s growth-inflation mix is not exactly looking favorable right now.”

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Apr 09

China Watch Blog has learnt that China’s inflation rate in March rebounded more than expected due to higher food costs, with the Consumer Price Index (CPI), the main gauge of inflation, rising 3.6 percent from a year earlier last month.

Food prices increase pushing up inflation

According to the National Bureau of Statistics, CPI was up from February’s 3.2 percent and more than the previous market expectation of 3.5 percent and food costs increased 7.5 percent year on year, compared with 6.2 percent in February.

According to the National Bureau of Statistics, its is trickier for the world’s second-largest economy to add growth-supportive measures.

Li Maoyu, an analyst at Changjiang Securities Co, was quoted as saying in a Shanghai Daily report that, “Such a rate may invite policymakers to be more cautious of any moves to stimulate the economy.”

Li said recent signals of consumer goods experiencing a new round of price increases triggered inflationary expectations again.

Last month, China raised the retail prices for gasoline and diesel by a larger-than-expected margin, and planned to introduce a graduated power tariff system. Afterwards, there were reports of higher prices of milk powder, cooking oil, fast food and shampoo, while producers cited more expensive raw materials and labor costs for their price jumps.

Cheng Siwei, a renowned economist and former vice chairman of China’s top legislature, said last week in Shanghai that the country should remain alert to inflation because speculative money tended to flow into the real goods market and bolster consumer prices when both housing and stock markets were weak.

Some other analysts were optimistic.

Lian Ping, chief economist at Bank of Communications, said inflation was still controllable and the country requires more measures to boost growth.

“Despite a rebound, it was the second month for the inflation rate to fall below the government target of 4 percent,” Lian said. “Considering the economic growth which may ease further, the country should cut the reserve requirement ratio at least once to stimulate the economy.”

China is to unveil the first-quarter gross domestic product growth on Friday, and economists estimated it will moderate to around 8.5 percent, down from 8.9 percent in the final quarter of 2011.

Deflating producer prices were another sign to dismiss inflationary pressure.

The Producer Price Index, a factory-gate measurement of inflation, lost 0.3 percent on an annual basis in March, the lowest since December, 2009.

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Apr 04

China Watch Blog has learnt that China’s GDP growth may have slowed to about 8.4 percent year-on-year in the first quarter, still boding well for the economy in 2012.

A China Daily report cited Zhang Xiaoqiang, deputy director of the National Development and Reform Commission, as saying that preliminary data from research agencies showed that the country’s consumer price index, a main gauge of inflation, is likely to rise 3.5 percent year-on-year in the first quarter.

The National Bureau of Statistics is due to officially announce the quarter’s CPI figure on April 9 and GDP on April 13.

“Stable growth has been set as the tone for 2012 by the government in the context of the uncertainties and challenges of the world economy,” Zhang said at a lunch session of the Boao Forum for Asia 2012.

There is no “hard landing” to worry about, unless growth drops to 7 percent for two consecutive quarters, said Zhang Yuyan, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

The nation will cut its 2012 growth target to an eight-year low of 7.5 percent and hold the CPI target at around 4 percent, according to the government work report delivered by Premier Wen Jiabao last month.

Wen said on Tuesday that despite the decline of a few major economic indicators, China’s economy as a whole continues to grow as the government anticipated in its exercise of macro controls.

Despite the falls, major economic indicators are still at reasonable levels, and confidence should be maintained in the country’s economic work, said Wen during a three-day inspection trip to Fujian province and the Guangxi Zhuang autonomous.

As the deputy director in charge of foreign capital use and the high-tech industry, Zhang also emphasized that China will continue to improve its investment environment and deepen cooperation with other Asian countries.

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Mar 10

China Watch Blog reports that last week, it was widely reported that China’s economy is slowing, and the country’s inflation eased to a 20-month low last month, creating more room for the world’s second-largest economy to roll out more growth-supportive policies when all other key economic indicators exhibited a slowdown.

The Consumer Price Index, the main gauge of inflation, rose 3.2 percent from a year earlier in February, compared to January’s 4.5 percent, the slowest since June 2010, and ended negative de facto interest rates in the past two years, the National Bureau of Statistics said.

Lower food prices contributed the most to the growth moderation.

Food costs, which account for almost a third of the CPI basket, rose 6.2 percent year on year in February, compared to January’s 10.5 percent.

Although data in the last two months may have been distorted by the timing of the Spring Festival holiday, which was in January this year but February the year before, analysts believe inflation is back on the downward track that was unexpectedly disrupted in January.

“China’s February price data makes it clear that inflation pressures are easing,” said Alaistair Chan, an economist at Moody’s Analytics. “A number of factors, including diminishing producer prices, suggest that overall inflation will continue declining in year-on-year terms until the mid-year.”

The Producer Price Index, the factory gate measure of inflation, edged up 0.7 percent on an annual basis in February, the same as in January.

Jing Ulrich, chairman of global markets, China, at JP Morgan, said lower inflationary pressure suggested the government would have wider scope to implement selective easing measures to counter the downside risks to growth.

“We expect inflation to continue moderating to about 2.8 percent by the third quarter of this year, and further reserve requirement ratio cuts will be needed to maintain stable economic growth,” Ulrich said.

China’s economy is slowing, according to the statistics.

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Mar 06

China Watch Blog reports that Ma Jiantang, China’s top statistics official, on March 5 said he expected inflationary pressure to ease a little as the economy slows this year.

The China Daily quoted Ma as warning of a resurgence in inflation if the problem is not taken seriously. “We should by no means lower our guard [against inflation],” he told Xinhua on the sidelines of the annual parliamentary session, which opened on March 5.

According to a government work report delivered by Premier Wen Jiabao at the annual parliamentary session, the Chinese government set the full-year inflation control target for 2012 at 4 percent, unchanged from the target in 2011.

The Consumer Price Index (CPI), a main gauge of inflation, well exceeded the government’s goal and shot up by 5.4 percent last year.

“Potential factors such as rising labor costs that push up prices are still there,” said Ma, director of the National Bureau of Statistics, which produces a string of economic data such as CPI and gross domestic product for the world’s second-largest economy.

“If not properly controlled, the inflation potential will turn into real risks for our economy,” Ma warned.

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Nov 22

China Watch Blog has learnt that the Mainland China economy is expected to grow 9.2 percent in 2012, a slight drop from 9.4 percent this year, a university report forecast, raising concerns on slowdown and financial risks.

China’s economic expansion will continue the easing trend in the first half of next year, according to a report released by the Beijing-based Renmin University of China.

Growth of China’s gross domestic product (GDP) slowed to 9.1 percent in the third quarter of this year from 9.5 percent in the second quarter and 9.7 percent in the first quarter, as the government tightened monetary policy to contain inflation.

To rein in excessive price gains triggered by a credit boom, the government has made inflation control its top priority this year and adopted monetary-tightening measures. So far, the central bank has raised interest rates three times and hiked reserve requirement ratio (RRR) by six times this year.

The weakening growth has promoted the central bank to stand ready to fine-tone its monetary policy in an appropriate and timely manner to stay in line with economic changes.

The continuous economic slowdown will lead to a significant shift in the government’s macroeconomic policies, which will buoy the economy to avoid a double-dip recession, the report said.

China will face bigger slowdown in growth of real economy, rising risks in fictitious economy and worsening structure problems next year, it said.

The report said China inflation will see a marked softening next year, with full-year rise at 3.3 percent.

The nation’s consumer price index (CPI), the main gauge of inflation, increased 5.5 percent in October year-on-year, marking the slowest rise since May.

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Oct 14

China Watch Blog has learnt that Chinese authorities have agreed to take steps to secure financial support for major cash-strapped railway projects in the country’s latest move to help the crippled sector.

According to a China Securities Journal report, the move follows a policy instituted earlier this month by the Ministry of Finance to halve the tax on the interest earnings of bonds issued by the Ministry of Railways (MOR) between the 2011-2013 period, in a bid to make the bonds more attractive.

China’s railway projects have embraced a binge since the country rolled out a stimulus plan worth four trillion yuan ($618.4 billion) to counter the financial crisis of 2008, leaving the sector with a huge appetite for cash now to fuel ongoing work.

But the industry has been hit hard recently as China has tightened its belt on the monetary market, causing delays for 70 percent of planned projects, according to a survey conducted by Chnrailway.com, a leading railway website in China.

To curb soaring inflation, China has raised banks’ reserve requirement ratio six times this year and hiked interest rates three times in a bid to check excessive lending.

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Sep 25

China Watch Blog has learnt that China’s inflation rate may accelerate to more than 6 percent year-on-year in June, which could bring the full-year consumer price index (CPI) for 2011 to as high as 5 percent, a government researcher said in remarks reported Sunday.

Zhang Zhuoyuan, an economist at the Chinese Academy of Social Sciences, a top government think tank in Beijing, was quoted as saying in a Global Times report that taming inflation would remain the priority in coming months. He called for faster steps to push real interest rates into positive territory and douse price pressures.

The People’s Bank of China has raised interest rates twice in 2011 and many analysts believe it may raise them again soon in an effort to control inflation.

“It will be very difficult for China to cap its annual inflation within 4 percent and the full-year CPI is likely to reach 5 percent,” Zhang was quoted as saying by State radio.

Beijing has set an annual inflation ceiling at 4 percent this year, but prices keep rising stubbornly and many economists have said it will be tough to achieve the goal.

Zhang said his inflation forecast for June also reflected the relatively low base of comparison of a year earlier.

He attributed the persistent inflationary pressure mainly to an excessive supply of money and credit over a long time, when Beijing rolled out a massive stimulus plan to shield the economy from the financial crisis.

According to a Reuters poll of 22 economists, China’s CPI in May may have accelerated to 5.4 percent from 5.3 percent in April.

The National Bureau of Statistics will publish monthly economic indicators, including the CPI, for May tomorrow.

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