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Chinese inflation eases in August, but probably not enough to ease import restrictions

Date: Fri, 9 Sep 2011 | Author: Paul Sanderson

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The rate of inflation in China dropped to 6.2 per cent in August, down from the three-year high of 6.5 per cent seen in July.

China’s National Statistics Bureau also said that the country’s industrial output had risen 13.5 per cent in August year-on-year. This was slightly down from July.

The government in Beijing has been attempting to contain inflation introducing measures to slow price growth. This has included efforts to stifle demand in the country including trying to force secondary commodity prices down through import duties and restrictions on materials entering the country.

Banks have also been told to hold onto more reserves in order to reduce lending to companies.

Data released by the China Federation of Logistics and Purchasing showed raw materials were increasing in cost for Chinese manufacturers.

The input price sub-index rose to 57.2 in August from 56.3 in July. This is considered a key indicator of raw material price growth.

In a report issued this week by Capital Economics, analyst Mark Williams said that the fragility of major export markets could mean that China eases credit domestically to keep demand steady even though Chinese president Wen has said economic policy will change only when inflation has fallen.

Williams added: “We would not be surprised if controls on credit growth were quietly eased much sooner, particularly if the global outlook worsens.” 

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