China's inflation rate lower than expected

Updated: 2013-04-10 10:55

By Chen Jia in Beijing and Yu Ran in Shanghai (China Daily)

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China's inflation rate lower than expected

China reported a lower-than-expected inflation rate in the first quarter of the year, a positive sign for the world's second-largest economy as it aims to shift focus from growth rate to quality.

The consumer price index, the major gauge of inflation, grew 2.1 percent in March from a year earlier, down from 3.2 percent in February, the National Bureau of Statistics said on Tuesday. It was much lower than the market consensus of 2.5 percent.

The latest figures pulled down the average CPI in the first three months to 2.4 percent, 1.1 percentage points lower than the government's annual target.

The release of China's first quarter economic data will continue with the gross domestic product, and foreign trade and investment figures later this week. Food prices, which account for 30 percent of the CPI calculation, decreased 2.9 percent, the largest monthly fall since July 2003.

The price of pork and chicken is said to have fallen by 10 percent following recent bird flu cases and the discovery last month of more than 10,000 pig carcasses floating in the Huangpu River, the major source of drinking water in Shanghai.

However, the investment bank Barclays said the bird flu epidemic in eastern China would not have a significant impact on inflation, although poultry demand will be hit. As of Tuesday, 28 people had been infected the H7N9 avian flu and nine people had died, two on Tuesday.

Lu Zhengwei, chief economist at the Industrial Bank, said consumer prices are likely to remain low in the second quarter because of sufficient market supplies.

The producer price index in March decreased 1.9 percent from a year earlier, the 13th consecutive drop, reflecting operational difficulties and pressure on profit growth in the industrial sector amid weak market demand. The PPI declined 1.63 percent in February and 1.64 percent in January.

"We are struggling just as most small and medium-sized companies saw thin profits due to the slow recovery of the slump in Europe," said Guo Junwei, owner of a clothes factory in Taizhou, Zhejiang province.

Li Daokui, an economics professor at Tsinghua University and a former adviser to the central bank, said inflationary pressure won't be high in the short term and the downside risk of economic growth should be addressed.

"We must be alert to a rapid slowdown," Li said, adding that he foresees a macroeconomic policy adjustment in the second quarter to support growth.

President Xi Jinping said on Monday that the country is still likely to maintain a high growth rate for a long time and needs to improve the quality and efficiency of the economy.

On Tuesday, the Asian Development Bank estimated China's growth for this year to be 8.2 percent and 8 percent for next year. The Chinese economy grew by 7.8 percent last year, the slowest in 13 years. The official target for this year is 7.5 percent.

"The country's new leaders are focused on delivering sustainable, quality growth, which is a welcome change from the growth-at-all-costs approach of the past," said ADB chief economist Changyong Rhee in a statement. "They will face a difficult task in managing risks and keeping the economy on an even keel, while shepherding through the complex reforms needed to deliver more inclusive growth."

Contact the writers at chenjia1@chinadaily.com.cn and yuran@chinadaily.com.cn

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