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English>>China Business

Low inflation 'offers stimulus opportunity'

By Chen Jia, Xing Zhigang and Yu Ran (China Daily)

07:49, October 16, 2012

A period of mild inflation may offer a greater opportunity for further stimulus, economists said after the government reported on Monday that the September consumer price index increased 1.9 percent year-on-year.

The CPI, a key inflation gauge, grew 2 percent in August and hit a two-year low of 1.8 percent in July. The second half of this year has seen low inflation and conditions are ripe for economic recovery in the last quarter, supported by the easing of fiscal and monetary policies since the second quarter, economists said.

According to the National Bureau of Statistics, food prices increased 2.5 percent year-on-year in September, 0.9 of a percentage point slower than the August rate, as prices for pork and fresh vegetables fell markedly when supply expanded.

The producer price index, an indicator of wholesale inflation, declined 3.6 percent year-on-year in September.

It is the lowest since November 2009. In August it dropped 3.5 percent and July saw a fall of 2.9 percent, suggesting that demand for producer goods was still weak.

But there are signs of manufacturing and market demand rebounding, driven by the moderate stimulus program since April, said Xu Hongcai, a senior economist with the China Center for International Economic Exchanges, a government think tank.

Now is "a good time to keep boosting growth" through the government-designed stimulus programs, he said.

The pro-growth policies that China has already rolled out are creating new investment demand and will start showing their full effect in the coming months, he predicted.

GDP will probably grow 7.7 percent year-on-year in the fourth quarter and exceed the government target of 7.5 percent for the whole year, he said.

Zhang Zongping, a sales manager for a trading company in Shanghai, said that export demand increased since September thanks to orders for Christmas and New Year.

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