Inflation remains a worry in China
Inflation in China moderated in September, but it remained stubbornly high amid growing signs of a global slowdown.
China’s consumer price index, the main gauge of inflation, was up 6.1% from a year earlier, down slightly from a 6.2% rise in August.
Still, the index remains far above the 4% annual target set by the central government. That will make it difficult for China’s central bank to loosen monetary policy to stimulate the nation’s economy.
There’s already evidence that the world’s factory floor is feeling the fallout from struggling economies in the West. Trade data released Thursday showed slackening demand for Chinese goods in troubled Europe.
Prices for crude oil and copper fell on news of the data, reflecting pessimism about China’s need to consume imported raw materials as voraciously as it has in the last few years to keep its factories and construction sites humming.
Meanwhile, thousands of small businesses in China’s coastal provinces are reportedly being squeezed by the country’s credit crunch. China’s State Council said it would support the small firms by increasing loans and offering tax breaks.
But central leaders said reining in inflation remains an overall priority, dampening expectations that policymakers will attempt to boost growth by loosening credit, lowering interest rates or lifting restrictions in China’s residential property market.
“For the moment, we remain in policy stasis — no more tightening, but no real loosening — while Chinese authorities nervously eye developments in the Eurozone,” said Alistair Thornton, an analyst for IHS Global Insight in Beijing. “It is the Eurozone and U.S. that form the greatest downside risk for China’s outlook.”
