China′s December inflation near five-year low | Business| Economy and finance news from a German perspective | DW | 09.01.2015
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China's December inflation near five-year low

China's economy is growing at its slowest pace in years as December inflation neared its lowest point since 2009. New numbers have raised concerns that the world's second-largest economy could be headed for deflation.

Inflation in China approached a five-year low of 1.5 percent in December, the National Bureau of Statistics said on Friday, prompting economists to call for more monetary stimulus to boost growth and ward off deflationary threats.

The growth rate marked a negligible uptick of 0.1 percentage point from November, in line with analysts' expectations.

"We expect inflation to remain low in the coming months with concerns over deflation risks continuing to rise," ANZ economists Liu Li-Gang and Zhou Hao said following the release of the data.

"We continue to argue that deflation provides more room for policy easing. Our best-case scenario is still two more rate cuts in the first half of this year and maybe three to four reserve requirement ratio cuts this year," said Minggao Shen, an economist at Citi in Hong Kong.

Slow growth

The consumer price index (CPI) rose 0.3 percent in December from November, while the producer price index (PPI) dropped 3.3 percent year-on-year - its 34th consecutive monthly decline and biggest dip since September 2012.

Consumer inflation for the whole of 2014 stood at 2 percent compared with the year before, well below the government's target of 3.5 percent, while the producer price index fell 1.9 percent last year.

The statistics bureau blamed the bad numbers on falling global oil prices and sluggish demand at home, which continue to weigh down the world's second-largest economy.

This comes as the country's annual economic growth likely slowed to 7.2 percent in the fourth quarter, a Reuters poll showed, suggesting that China's full-year growth is crawling at its slowest pace in 24 years.

This fuelled expectations that the People's Bank of China would cut interest rates further, or lowering reserve requirement ratios (RRR) for all banks. This comes just two months after the bank moved to lower rates, its first such move since May 2012, prompting speculation that the bank could take a wait-and-see approach as it waits for its most recent action to take effect.

pad/hg (AFP, Reuters)

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