China’s CPI grows 1.0% in Jan
February 11, 2009
China’s consumer price index (CPI), the major gauge of inflation, has climbed 1.0% year on year in January, said the National Bureau of Statistics (NBS) on Tuesday.
The CPI climbed 0.7% in urban regions, while CPI in rural areas rose 1.5%, according to the statistics.
NBS states that the food price jumped 4.2% in 2008, while prices in the non-food sector edged down 0.6%.
The price of meat dropped 2.8% year on year, while pork is down 13.3%. The price of edible oil dropped 13.9% from a year earlier. There was an 11.6% increase in the price of aquatic products, a 3.9% increase in the price of grains, and a 19.6% surge in the price of vegetables.
NBS also announced that China’s producer price index (PPI), the index for industrial products, went down 3.3% in January, and fell 2.2 % compared with last December.
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As Inflation Falls,Time to Support Growth
October 19, 2008
As we frequently emphasized in our posts and told our clients, Chinese government was waging a war against inflation by tightening monetary policies which widely hurts exports of China. Now with the August inflation lowered to %4.9, China rapidly moved to support growth again:
It’s time for China to boost growth  (By Wang Yanlin, Shaghai Daily Newspaper)
IN the first eight months of the year, the government’s top priority, while framing macro economic policies, was the fight against inflation. But there has been a slight shift in emphasis.
Last Monday when Vice Premier Wang Qishan delivered a speech at the 12th China International Fair for Investment and Trade in Xiamen, Fujian Province, he said the current goal of the government was to “realize a stable and relatively fast economic growth” and “put the rising inflation under control.”
This is possibly the first time that “spurring growth” has been put higher on the agenda than “curbing inflation” by a heavy-weight government official during a formal business occasion this year.
Policy makers are usually very circumspect while commenting on policy issues in public. So is Wang’s public stance an indication that top decision makers could be considering the odds of adjusting macroeconomic policies? This may well be so.
Economists and analysts have been urging the government to shift focus from taming inflation to supporting growth.
The newly released economic data show China’s gross domestic product has slowed to 10.1 percent in the second quarter, down from 10.6 percent in the first three months and 11.9 percent last year.
The Consumer Price Index, the main gauge of inflation, grew at 4.9 percent in August – the slowest pace in 14 months. It has been on the decline for four consecutive months and the speed at which inflation eased went beyond economists’ boldest expectations.
Industry slowing
In contrast to the softening inflationary pressure, the risk of slower economic growth is intensifying.
In August, industrial production grew 12.8 percent, the slowest since February last year.
Among the sectors which dragged down output was the automobile industry, which used to be a major growth driver. The automobile sector fell 3.3 percent last month.
Exports, another key element of overall economic expansion, rose 21.1 percent in August, cooling down from a 22.9-percent jump a month earlier.
The slower growth came despite the government increasing export tax rebates for textiles and garments – the two sectors hardest hit by yuan appreciation and weaker demand from developed markets.
China’s urban fixed-asset investment increased 27.4 percent in the first eight months, keeping a stable growth momentum. But analysts said this was mainly bolstered by the demand created by the May 12 earthquake in Sichuan Province.
On the other hand, domestic consumption looks robust. Retail sales in August jumped 23.2 percent, slightly up from the July figure which saw the fastest rise since 1996.
However, the rest of the year may see a downturn with no new strong selling points, like the housing and automobile sectors of the past, to boost growth.
All figures now seem to point in one direction °?- that the government should take concrete steps to sustain economic growth. Huang Yiping, an economist with Citigroup, said the CPI which fell below 5 percent in August could help shift the balance of policy concerns toward growth.
Sops may work
“The probability of a policy reversal may rise significantly in the coming months, as global economic conditions continue to deteriorate and domestic corporate sectors increasingly feel the impact of growth slowdown,” said Huang.
“Although the People’s Bank of China has so far maintained its bias toward tight monetary policies, it has introduced a number of measures to fine-tune trade policies as well in recent months,” he added.
The analyst said that the central bank’s steps include expansion of credit quota, slowdown of currency appreciation and increases in export tax rebates.
“This shift in policy concerns should be reinforced to keep the CPI at a healthy level,” Huang noted.
But there is a major hurdle in the way of a complete turnaround as producer prices, the factory-gate inflation measure, also keep going up.
The Producer Price Index in August soared to 10.1 percent, the highest in 12 years. Rising factory-gate costs are generally passed on to the end users, but this may in turn affect consumer prices, analysts said.
Economists suggest China should continue with its fine-tuning measures for the time being. Relaxing the credit quota, slowing down yuan appreciation and selected reduction of tax burden could go a long way to boost the economy.
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China’s inflation cools at last
October 14, 2008
Inflation rates are crucially important for China’s economy. To me, it is the most decisive indicator in shaping government policies on economy, finance, trade etc.
For example, the soaring inflation at the beginning of the year was the main reason behind the tightening monetary policy which squeezes credits for factories, makes trade policies restrictive, quickens the appreciation of chinese currency. So every company making business with China needs to follow the inflation gadget to foresee possible risks and opportunities.
China’s inflation cools at last
By Lydia Chen (Sanghai Daily)
CHINA’S inflation rate dropped to the slowest pace since June 2007 with smaller gains in food prices, a boost to policy makers working on adjusting macroeconomic policies to support the country’s economic growth.
The consumer price index, a broad measure of inflation, rose 4.9 percent in August from a year earlier, after gaining 6.3 percent in July, the National Bureau of Statistics said this morning.
Food costs, accounting for a third of the CPI basket, surged 10.3 percent year on year last month. Within the category, meat and poultry prices soared 8 percent in August.
The cost of pork, the nation’s staple meat, increased 1 percent last month from a year ago while cooking oil prices rose 22.7 percent. Vegetable prices were down 0.5 percent last month from a year ago. Grain prices gained 8 percent in the period.
The combined CPI grew 7.3 percent from January to August, the bureau said.
Consumer-price inflation has slowed for four months. February’s 8.7 percent pace was the fastest in 12 years. The central bank’s target for the year is 4.8 percent, the same as the actual rate in 2007.
But producer-price inflation advanced 10.1 percent in August after rising 10 percent in July. The August jump was the fastest pace since at least 1996, according to the bureau today.
The faster producer inflation rate may lead policy makers to introduce more balanced measures to boost growth against the risk that inflation will accelerate again.
China may adopt tax cuts, a slower pace of yuan appreciation and more easing of lending restrictions to protect jobs and avoid an economic slump as export demand falters.
China’s economy expanded 10.1 percent in the second quarter from a year earlier, slowing for a fourth straight quarter, as exports cooled. Many economists said the growth may ease to 9 percent this year.
Profit growth for listed companies slumped in the first half, helping push the key stock index in the Shanghai market down nearly 60 percent so far this year. Weaker overseas demand, rising costs and a strengthening currency have put pressure on exporters of shoes, toys and clothes.
Economists expect China’s monetary policy will steadily turn more growth-friendly, given the concerns and moderating inflation.
In July, the central bank eased restrictions on how much banks can lend. It raised the 2008 loan quotas for national banks by 5 percent and for regional lenders by 10 percent, according to reports by the Goldman Sachs Group Inc, BNP Paribas SA, and the China Merchants Bank Co.
The People’s Bank of China has kept interest rates unchanged this year and hasn’t increased the reserve ratio for banks — the proportion of deposits that lenders are required to set aside — since June.
The Chinese yuan has climbed only 0.2 percent against the dollar this quarter after a 6.5 percent advance in the first half. Gains hurt exporters by making their products more expensive and less attractive in overseas markets.
The government has already cut taxes on exports of textiles and garments and encouraged more lending to small and medium-sized businesses. Officials are working on a plan for as much as 400 billion yuan (US$58 billion) in tax cuts and spending to prevent an economic slump, according to economists and reports in domestic news media.
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Slowdown But not Downturn !
September 4, 2008
Inflation topping at %8.7 at February, snowstorms hitting Guandong , earthquakes devastating Sichuan, Amerikan credit crisis cutting orders, tight monetary policy tightening credits,and finally global economic slowdown…  all those touch the brakes of the chinese economy. But still there is no gloomy picture, here is why  :
CHINA is experiencing a temporary economic slowdown rather than a downturn, said Cheng Siwei, former vice chairman of the Standing Committee of the National People’s Congress, raising the prospect that adjustments might be necessary.
“The domestic inflation, severe winter weather, devastating earthquakes and the weakening global economy in the first half year have pushed the country’s economy to the edge of decline, but it is getting better,” Cheng said in a China Central Television talk show aired on Tuesday night.
He said according to the business cycle theory, an economy develops in cycles, and 10 years constituted a cycle for China’s economy.
The decade from 1990 to 2000 saw a near 14-percent growth in gross domestic product in the first two or three years and then a slowdown to about 8 percent in the remaining period. Economic growth continued rising from about 7.3 percent per annum in 2001 to 11.4 percent in 2007.
The estimated GDP growth rate in 2008 may slow to around 10 percent. Worry over a downturn for the Chinese economy reemerged.
However, he didn’t agree with the view that the Chinese economy faced a watershed, noting that this year’s growth rate, compared with 2007, meant only a temporary slowdown lasting two or three years.
The country’s decision makers now face the problem of combating inflation while at the same time boosting economic growth in the rest of the year to ensure a steady and fast economic development.
Source:China Daily
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Inflation and costs curb growth
September 1, 2008
RISING raw material costs and inflation restrained the profit growth of listed companies on the Chinese mainland in the first half of this year.
Shanghai-listed companies earned a combined 481 billion yuan (US$70.2 billion) in net income in the period, rising 15.85 percent on a yearly basis, much slower than the 69.2-percent growth at the same period a year earlier, according to the Shanghai Stock Exchange.
Revenue for the 863 companies rose 24.98 percent to 4.54 trillion yuan, while costs rose 35.65 percent to 3.98 trillion yuan in the period, the Shanghai bourse said on its Website today.
“Most listed companies kept an upward trend in profit by boosting main business and controlling costs despite hiking material costs and rising inflation,” the bourse said in a statement.
The Shanghai Composite Index tumbled about 50 percent in the first half, equivalent to a 14 billion-yuan loss in market value. Rising raw material costs drove the country’s consumer price index up 7.9 percent in the period.
Stated-owned enterprises controlled by the central government accounted for 83 percent of the combined profit in the period, contributing 67.49 percent to the growth.
The finance industry outperformed other industries as its combined profit accounted for 53.52 percent thanks to the expanded interest spread, intermediate business of banks and decreased tax rates, the statement said.
Meanwhile, 488 companies listed in Shenzhen rose 16.13 percent in net income to 58.72 billion yuan and revenue advanced 23.11 percent to 944 billion yuan, the Shenzhen bourse said in the separate statement.
Source:Xinhua
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