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China’s Inflation Rate Rises to 3.6 Per cent in March

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Source: AFP


China’s inflation rate edged up in March, driven by rising food costs, official data showed Monday, but analysts said there was still scope for Beijing to stimulate the slowing economy.

The consumer price index (CPI) rose to 3.6 per cent in March from 3.2 per cent in February, slightly higher than analysts’ expectations, as bad weather pushed up food prices and authorities raised the price of fuel.

Inflation ‒ one of China’s biggest economic concerns because of the potential for rising prices to trigger social unrest ‒ hit a high of 6.5 per cent last July, but has gradually slowed since then.

In February, it hit its lowest rate since 2010, and analysts expect it to remain under 4 per cent this year, allowing the government to further loosen credit conditions to boost businesses hit by the global economic slowdown.

“CPI was mainly pushed up by food prices, which resulted from an undersupply of vegetables due to relatively cold weather in March,” Li Huiyong, a Shanghai-based analyst at Shenyin Wanguo Securities, told AFP.

“We think the downward trend will likely be unchanged, with the CPI bottoming out in July this year.”

Premier Wen Jiabao, speaking at the opening of the annual session of parliament in March, warned consumer prices remained high and said the government’s aim was to keep inflation within 4 per cent this year.

“There’s still room for the central bank to lower reserve ratio requirements soon,” said Tang Jianwei, an economist with the Bank of Communications in Shanghai.

The producer price index (PPI), which measures the cost of goods at the farm and factory gate and is a leading indicator of consumer prices, fell 0.3 per cent year-on-year in March, showing deflationary pressures are still at work on prices.

“PPI figures could be of concern and push the government to be more active on easing credit,” said Xianfeng Ren, an economist with IHS Global Insight.

China has cut its economic growth target to 7.5 per cent this year, from 8 per cent last year, in an official acknowledgement that the export-driven economy is slowing.

Analyst expect first-quarter economic data due out on Friday will confirm the slowdown in growth in the world’s second-biggest economy as Europe’s debt crisis and sluggish US economic recovery hurt demand for its products.