China’s inflation hit a 17-month low of 4 percent last month, down from 4.6 percent the previous month, the government said yesterday.
The figure is the lowest since May last year, confirming a trend for weakening inflation in the world’s fourth-largest economy, as growth creation becomes more of a policy concern.
The consumer price data from the National Bureau of Statistics were released a day after China announced that wholesale prices — another inflation gauge — eased to 6.6 percent last month, down from 9.1 percent in September.
The significant fall in wholesale prices indicated a sharp drop in demand, said Zhang Xinfa, a Beijing-based economist with Galaxy Securities (中國銀河證券).
Food prices, the main factor in driving up consumer prices in China recently, rose 8.5 percent last month, down from 9.7 percent in September, the bureau said.
China began this year with inflation control at the top of its list of priorities, but with the trade surplus likely to shrink this year, economic growth has become the dominant policy objective in Beijing.
“The downtrend in inflation has allowed the government to take more aggressive monetary and fiscal action without stoking consumer prices,” JP Morgan’s Jing Ulrich said in a note.
China unveiled a US$586 billion stimulus package this week in the strongest indication yet that the government is concerned about the impact the global crisis has on domestic growth.
The fiscal stimulus was welcome news but it will take time for its effects to be felt, and in the meantime, both inflation and activity growth are expected to fall further, Goldman Sachs economist Yu Song (宋宇) said.
In the first 10 months of the year, China’s consumer price index (CPI) increased 6.7 percent from the same period last year.
China’s fourth-quarter CPI is likely to fall within Beijing’s target of 4.8 percent, but high inflation in the first half of the year means it is unlikely to meet its target for the whole year, Moody’s economist Sherman Chan (陳穎嘉) said.
“Nevertheless, slowing inflation gives the People’s Bank of China the green light to cut interest rates in coming months, helping to shore up the cooling economy,” she said.
In a separate news, more than 1,300 companies shut down, suspended operations or moved out of China’s Pearl River Delta in the first nine months of the year because of the global downturn, state press said yesterday.
The number is from the cities of Shenzhen and Dongguan only and the overall figure for all of Guangdong Province could be much larger, the China Daily said.
About 30 percent of overseas-invested firms in the delta region are losing money, the report said, citing Wu Jun, a senior official with the province’s foreign trade department.
Half of them just manage to break even and only 20 percent post a profit, he said.
Exports from the province rose by 13.5 percent in the first nine months, down from 24.2 percent in the same period last year, customs data showed.
The weakening exports have impacted the desire of foreign companies to invest in Guangdong and the local governments are now introducing new incentives to encourage investment, Wu said.
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