Chinese prices continued to fall in July from a year earlier, reducing the likelihood that Beijing will soon adjust its policy of boosting growth with easy credit and surging infrastructure spending.
According to data released by the National Bureau of Statistics on Tuesday, China"s consumer price index fell 1.8 per cent while the producer price index was down 8.2 per cent from a year earlier, despite a flood of bank lending and investment in recent months.
Fixed asset investment rose 32.9 per cent from a year earlier in July while industrial output expanded by 10.8 per cent, the fastest rate in nine months. The figures provided further evidence of recovery in China"s economy, which has come largely as a result of government investment and state-directed lending that saw new bank loans triple in the first half from the same period last year.
Meanwhile, China"s exports and imports continued to decline in July from a year earlier, underscoring the need for the government to maintain its domestic investment-led stimulus.
Exports were down 23 per cent from a year earlier, while imports fell 14.9 per cent but both were up around 10 per cent month-on-month from June, continuing a sequential rebound that began in April.
While Beijing is worried about asset price inflation in the real estate and stock markets, the negative year-on-year CPI and PPI readings provide the government with breathing room to maintain its 芒鈧搈oderately loose芒鈧?monetary policy, according to economists.
芒鈧揚eople will pay most attention to the inflation figures to see whether the government is likely to tighten its monetary policy,芒鈧?according to Vincent Chan, an economist at Credit Suisse in Hong Kong. 芒鈧揟hese latest figures mean there will be no near-term change in the government"s monetary policy.芒鈧?/P>
Senior leaders have repeatedly emphasized their commitment to the current loose monetary conditions in recent weeks but the central bank and banking regulators have also ordered banks to rein in new lendingand reduce exposure to potential bad loans.
In a recent report, China"s central bank forecast CPI would bottom out at the end of the fourth quarter and while prices fell year-on -year, CPI was flat in July from a month earlier, while PPI rose 1 per cent from the previous month.
China"s rampant manufacturing overcapacity raised serious worries earlier this year over the potential for deflation but that fear has receded amid strong domestic demand, a flood of liquidity and rising global commodity prices.
According to official data, retail sales of consumer goods rose 5.2 per cent in July from a year earlier, a healthy pace compared to most other economies but still 8.1 percentage point lower than the year-on-year growth in July last year.