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China inflation slows, has it peaked?


China inflation slows, has it peaked?


Inflation remains stubbornly high in China even as economic growth there showed signs of cooling.

Chinese policymakers have said that tackling inflation is their top priority for this year after high food prices raised fears of broader inflation that could derail the recovery or even spark social unrest.

Consumer inflation eased modestly to 5.3 percent in April from a 32-month high in March of 5.4 percent.

That could mean price pressures are peaking and may start to ease in the second half of this year.

But some Chinese are suffering more than others according to Xu Qiyuan of the Chinese Academy of Social Sciences: “Inflation is a political, not just a financial issue, because with inflation the rich get richer as they have financial possessions – fixed assets and shares – that increase in value when there’s inflation. But the poor don’t have financial possessions. So the wealth gap widens.”

China’s inflation target this year is four percent, but with increasing labour costs and rising commodity and fuel prices some analysts say that could be difficult to achieve.

High inflation may nudge China’s currency higher, with policymakers in Beijing indicating they’ll use the yuan as a weapon to fight what is known as imported inflation.

At the same time it was announced that industrial output growth in the world’s second-biggest economy eased much more than expected in April, reducing the need for further aggressive monetary policy tightening.

Industrial output rose 13.4 percent from a year earlier, but that was more than a full percentage point below both expectations and a strong pace in March.

Retail sales growth eased more than expected while annual increases in money supply and outstanding yuan loans hit their lowest pace in 29 months, signs that measures to slow the economy are starting to take effect.

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