Chinese inflation falls in August to 6.2%

Jem_B · 发表于 2011-9-17 18:14:05

中国8月CPI同比上涨6.2%
China’s attempts to cool persistent price increases appear to be taking effect as the pace of inflation slowed in August from a three-year high in July.

The country’s consumer price index, a key indicator of inflation, rose 6.2 per cent in August from a year earlier, compared with a 6.5 per cent rise in July, according to figures released on Friday by China’s National Bureau of Statistics.

The Chinese government and most economists had predicted that inflation would peak by August and the slowdown is largely in line with expectations.

Consumer prices rose 0.3 per cent in August from the previous month, compared with a 0.5 per cent increase in July, marking the second consecutive moderation in the month-on-month reading.

Volatile and politically sensitive food prices rose 13.4 per cent in August from a year earlier, slowing from a 14.8 per cent rise in July.

Since last October, Beijing has raised interest rates five times and increased the portion of deposits that banks must hold in reserve nine times in an attempt to cool overheating growth and bring down inflation.

The country’s economy has started to slow in recent months and most economists predict the government will be able to engineer a “soft landing” that preserves strong growth while bringing inflation down to a more comfortable level.

After nearly a year of progressively tightening monetary policy the government appears to be nearing the end of this tightening cycle as long as inflation continues to moderate in the coming months, as most economists have predicted.

With important trade partners like Europe and the US facing significant deterioration in their growth outlooks, analysts say Beijing is unlikely to carry on slowing its economy although it is not ready to begin loosening monetary policy just yet.

After nine hikes in the required reserve ratio, large Chinese banks must currently set aside 21 per cent of their deposits as reserves held by the central bank.

“If there were another big shock out of Europe, for example, then Beijing has 21 per cent of the country’s bank deposits on hand,” said Stephen Green, chief economist for Greater China at Standard Chartered. “As long as inflation is contained, they can flick a switch and inject hundreds of billions of renminbi into the economy if they need to”.

In August, the producer price index also moderated from the previous month, rising 7.3 per cent from a year earlier, compared with July’s 7.5 per cent year-on-year increase.

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