China inflation hits five-year low | Business| Economy and finance news from a German perspective | DW | 10.02.2015
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China inflation hits five-year low

China's inflation has dipped well below 1 percent, reaching its lowest level in about five years. Economists spoke of deflation becoming a real risk for the economy and urged further monetary policy easing.

China logged a mere 0.8 percent rise in the consumer price index in January year-on-year, the National Bureau of Statistics reported Tuesday, fueling fears the world's second-largest economy could be on the brink of a deflationary spiral.

The new data came on the back of a 1.5-percent inflation rate in December, marking the lowest level since the 0.6 percent posted in November 2009.

While moderate inflation is widely regarded as a boon to consumption, encouraging people to buy before prices go up, falling prices tend to prompt shopper s to delay purchases and companies to put off investment. Both developments can potentially hurt growth.

Central bank action required?

Throughout 2014, the consumer price index was 2 percent, down from 2.6 percent in 2013 and well below the Chinese government's target of about 3.5 percent.

"The weak profile suggests that deflation has become a real risk for China, thus paving the way for further monetary policy easing," ANZ economists Liu Ligang and Zhou Hao said in a research note.

The statistics office attributed January's low inflation rate first and foremost to retreating food prices and falling oil prices.

"If consumption cools down [because of low inflation] while investment struggles to rebound, the economy will face even more trouble," China Merchants Bank analyst Liu Dongliang told AFP news agency.

hg/uhe (AFP, AP, dpa)

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