Focus Shifts to Economic Growth as China’s Inflation Rate Eases

Consumer inflation in China declined from 6.1 percent in September, to 5.5 percent in October, allowing Beijing some room to boost its economy, which is currently viewed as the second largest in the world. The lower inflation rate offers China’s leaders the opportunity to reverse interest rate hikes and other measures put in place with the goal of cooling the economy which grew by as much as 9.1 percent in the last quarter. Analysts have noted that curbing inflation had been a priority for some time now, and with some progress in meeting that goal, authorities are likely to focus on economic growth, which is facing the challenge of decreased demand from European and United States export markets, along with an embattled real estate market. Export orders placed by Western buyers at the recent Canton Fair dropped by between 20 and 25 percent, reaffirming the trend of decreased export demand.

The drop in the inflation figure has been attributed primarily to the slow-down in the increase of food prices – a situation welcomed by Chinese consumers, many of whom spend up to half of their income on food. Food costs in September rose by 13.4 percent, with October registering an increase of 11.9 percent. As China’s autumn harvest starts, it is anticipated that inflation will further ease. Wholesale inflation fell from 6.5 percent in September, to 5 percent in October. Premier Wen Jiabao recently reiterated that there will be no easing of the property-tightening moves as authorities pursue the target of returning real estate prices to normal.