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China inflation eases, signaling frail recovery

Consumer prices in China have been rising slower than Beijing had hoped, signaling lingering weakness in the economy.

Inflation in China cooled slightly more than expected in June to 2.3 percent, official data showed Wednesday, an indication of the frail recovery in the world's second-largest economy.

The consumer price index (CPI), a key measure of inflation, also rose 2.3 percent in June from a year earlier, the National Bureau of Statistics said.

That rate is still well below the 3.5 percent annual target

announced by Beijing in March

, but experts said it gives the government room to cut interest rates or implement other measures to shore up the slowing economy.

"The weaker CPI reading suggests inflation pressure is muted," said Wang Jun, an economist at the China Center for International Economic Exchanges. "It provides further room for policy easing in the future on the one hand, and also signals the weak demand from the domestic economy on the other hand."

Concerns about the health of the Chinese economy have ebbed somewhat this year as authorities have introduced what they have called a "mini-stimulus," that included tax breaks for small businesses and incentives to encourage lending in rural areas.

Economists said they expected consumer prices in China to remain relatively stable this year, which will take some pressure off Beijing as it tries to wean the country off foreign trade and investment in favor of an economy largely reliant on its own domestic consumption.

Food prices, which accounted for roughly one-third of the CPI calculation and were the main driver of inflation, rose 3.7 percent year-on-year in June, down from 4.1 percent growth in May.

cjc/ (Reuters, AP, AFP, dpa)

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