CHINA COOLING

CHINA'S INFLATION PACE COOLS

China's inflation slowed in August, raising hopes Beijing will not further tighten monetary policy this year.

Michael Sainsbury

The Australian, September 9, 2011

But an annual inflation pace of 6.2 per cent last month – well ahead of the 4 per cent government target -- is still being driven by high food and real estate prices.

Increasing demand for food by China’s swelling middle class, combined with double-digit wages growth across the country, has lead many to conclude inflation in the world’s second largest economy will remain stubbornly elevated.

Premier Wen Jiabao this week emphasised stabilising prices remained the government’s number one economic priority.

While inflation edged down from a three-year high of 6.5 per cent in July, the August data exceeded slightly market expectations of 6.1 per cent.

“The moderation in headline inflation is largely due to a high base recorded in the second half of 2010,” ANZ economists said in a note.

”As sequential growth remains upbeat, it is too early to say that inflationary pressures have eased. Food prices, led by pork, are still on the rise, suggesting strong inflation expectations and soaring pesticide costs.”

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