Inflation in China Slowing Down

Keeping Inflation Under Control in China

In December 2011 inflation in China was slightly lower, paving the way for Chinese economic policy to continue in its careful path of slightly relaxing its generally tight control, helping to support the slowing Chinese economy.

Investors in China, including Benjamin Wey of New York Global Group (NYGG), carefully monitor the ongoing behavior of the Chinese economy and policymakers in their efforts to predict how the Chinese economy will perform in the future.

In December consumer prices rose in China by only 4.1 percent, the lowest inflation in the past 15 months especially compared to the peak in July of 6.5 percent. December’s low inflation was the fifth month in a row of shrinking inflation.

"This continued moderation in price pressures is a welcome development and will increase the scope for policy to respond should growth start to weaken more sharply in coming months," commented one analyst.

One third of the total Chinese consumer price index is determined by the price of food, which was actually higher in December, going up by 9.1 percent over rate in December of 2010, and compared to 8.8 percent this past November. Analysts believe much of the increase was due to the fact that this year Chinese New Year was earlier in 2012 than what is usual, fueling earlier holiday shopping which contributed to the price rise for food.

"Consumer price inflation is not the key concern for policymakers for now. Growth is slowing down quickly as imports in December indicated," said one economist. "Policy is clearly in an easing cycle."